Kentucky’s Pension Systems Could Profit Off of Marijuana

FRANKFORT, Ky. — It may be illegal in Kentucky but that is not stopping Kentucky’s two largest pension systems from investing in the marijuana industry.

Investment records show the Kentucky Retirement System and the Kentucky Teachers’ Retirement System are invested in Innovative Industrial Properties, a company that bills themselves as the “leading provider of real estate capital for the medical-use cannabis industry”.

The San Diego based company, however, invests in more than just medicinal marijuana; they also hold investments in recreational marijuana cultivation centers. The Chicago Sun-Times reports the company has invested $25 million in Ascend Illinois a recreational marijuana cultivation center in Barry, Illinois.

Beau Barnes, Deputy Executive Secretary of Operations and General Counsel of TRS say the investment into the company was done passively and was just one of 600 companies included in the S&P 600 Stock Index portfolio. 

“It wasn’t something where staff sat around and said we want to invest into this company,” Barnes said. “We’re replicating what the S&P 600 does and as a result, anybody with a 401(k) plan that’s in the S&P 600 Stock Index or anybody in the mutual fund would have this same investment.”

The amount TRS invested into the company is small with just 3,000 shares resulting in a $230,000 investment out of a $20 billion portfolio but it’s a stock that could see some profit.

Yahoo! Finance shows the Innovative Industrial Properties earnings per share jumped from $0.61 to $1.47 over the last year and the company’s revenue continues to grow. This could be a result of increasing profits from the recreational marijuana business. Illinois reported more than $5 million in marijuana sales in the first two days of legalization. Barnes says the company’s profits will not make a difference in the unfunded liability in TRS.

“It’s such a small number it’s just not gonna move the needle at all,” Barnes said. “The entire S&P 600 accounts that together is a substantial investment but this is just a tiny, a minuscule fraction of that entire overall amount.”

Barnes says investors will not be looking at the company and changing it to active investment. 

When it comes to KRS, an external investment manager has also invested a small amount into the company a little more than $77,000.

Republican Kentucky State Treasurer Allison Ball sits on the Kentucky Teachers’ Retirement Board and remains hesitant to invest more into an industry that is not legal federally but acknowledges Kentucky’s investment into Innovative Industrial Properties was not done with a specific intent to invest into the growing industry.

“In contrast to an active investment fund, which is when you specifically identify the companies to invest in, a stock index fund such as the S&P 600 encompasses hundreds of companies compiled into a portfolio that make these investments more obscure to the holders,” Ball said in a statement to Spectrum News 1. “I have been in frequent contact with state treasurers from states that have legalized marijuana who face investment challenges as marijuana is not legal federally. The investment into a property used for marijuana, medical or recreational, creates a host of problems including instability and criminality, and Kentucky should not consider active investments in a company of this nature until the issues resulting from the federal status of marijuana are resolved.”

The Office of Governor Andy Beshear says they were just made aware of this investment. 

“This has just been brought to our attention and we will discuss this with the retirement system,” Deputy Communications Director Sebastian Kitchen said in a statement.

TRS is 58.1% funded.