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Our Approach to Tobacco and Nicotine
The Global Problem of Tobacco Use
Tobacco use remains a leading global cause of preventable illness and death, with more than a billion people still smoking despite decades of public health measures. Tobacco use expanded dramatically with industrialisation, and it was only in the mid-20th century that scientific evidence conclusively revealed smoking's role in major diseases. Governments have since imposed stringent regulations, yet smoking persists—especially in lower- and middle-income countries—causing over seven million deaths annually and substantial social and economic harm.
The Concept of Tobacco Harm Reduction (THR)
Are nicotine alternatives a genuine breakthrough in reducing smoking-related harm, or just a cynical industry tactic to capture more users? As scientific evidence increasingly supports the role of safer nicotine products in driving down smoking rates, understanding tobacco harm reduction (THR) has become essential for investors, policymakers and consumers. This section explains the principles behind THR, the innovations reshaping nicotine use, and why these products represent one of the most promising public health breakthroughs of our time.
Evidence of Real-World THR Efficacy
A growing body of rigorous, real-world evidence shows that reduced-harm nicotine products can significantly accelerate declines in smoking. From the Cochrane Review’s high-certainty findings on e-cigarette effectiveness to population-level transformations in Sweden, Japan and the UK, the data is becoming increasingly compelling. We summarise the strongest contemporary research and highlight some markets where THR has already reshaped smoking behaviour.
The Controversy Surrounding Tobacco Harm Reduction
Why does tobacco harm reduction remain one of the most contentious debates in public health, even within the WHO? Despite overwhelming evidence that safer nicotine alternatives can save millions of lives, political resistance and outdated perceptions continue to block access globally. Read on to uncover the reasons behind this controversy and why understanding it is crucial to shaping the future of tobacco control.
Engagement vs. Divestment in the Tobacco Sector
Divestment has long been the default strategy for investors seeking to distance themselves from tobacco’s well-documented health impacts. But as reduced-harm nicotine products reshape the industry, simply excluding tobacco companies does little to influence real-world outcomes. We believe that active investor engagement - grounded in science, transparency, and governance - is a more effective way to change company behaviour and accelerate the consumer shift toward reduced-risk products and meaningful harm reduction.
Hexis Nicotine Transition Score
The Hexis Nicotine Transition Score (HNTS) is our proprietary framework for assessing industry transition from combustible tobacco to safer nicotine products, commonly referred to as Reduced Risk Products (RRPs). We aim to capture not only a company’s progress to date, but also its RRP growth potential and commitment to transformation in a responsible and sustainable way.
Videos
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An investor should consider the investment objectives, risks, and charges and expenses of the fund carefully before investing. A prospectus which contains this and other information about the fund may be obtained by calling 1-800-617-0004, or by clicking here. The prospectus should be read carefully before investing.
Investing involves risk. Principal loss is possible. The Fund is a recently organized entity, giving prospective investors a limited track record on which to base their investment decision. The Fund’s investments will be concentrated in the securities of issuers in the tobacco, or nicotine - related group of industries. The tobacco industry is subject to significant risks and uncertainties that could materially and adversely affect the financial condition and cash flows, of companies operating in it. Investing in foreign securities typically involves more risks than investing in U.S. securities, and includes risks associated with: (i) internal and external political and economic developments – e.g., the political, economic and social policies and structures of some foreign countries may be less stable and more volatile than those in the U.S. or some foreign countries may be subject to trading restrictions or economic sanctions; (ii) trading practices – e.g., government supervision and regulation of foreign securities and currency markets, trading systems and brokers may be less than in the U.S.; (iii) availability of information – e.g., foreign issuers may not be subject to the same disclosure, accounting and financial reporting standards and practices as U.S. issuers; (iv) limited markets – e.g., the securities of certain foreign issuers may be less liquid (harder to sell) and more volatile; and (v) currency exchange rate fluctuations and policies. Investment in emerging market securities involves greater risk than that associated with investment in securities of issuers in developed foreign countries.
Derivatives may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other investments, including risks relating to leverage, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, high price volatility, lack of availability, counterparty credit, liquidity, valuation and legal restrictions. A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in market value of the assets underlying the contract, which may include a specified security, basket of securities, or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. The Fund is a non-diversified, investment company under the 1940 Act. Because the Fund is non-diversified, it will invest a greater percentage of its assets in the securities of a limited number of issuers. Investing in medium and small capitalization companies may involve special risks because those companies may have narrower product lines, more limited financial resources, fewer experienced managers, dependence on a few key employees, and a more limited trading market for their stocks, as compared with larger companies. The securities of micro-cap companies may be more volatile in price, have wider spreads between their bid and ask prices, and have significantly lower trading volumes than the securities of larger capitalization companies.
ETFs are subject to risks that the market price of an ETF's shares may trade at a premium or discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact an ETF's ability to sell its shares. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. Brokerage commissions will reduce returns
The Hexis Active Nicotine Engagement ETF is distributed by Quasar Distributors, LLC
Definitions used on these pages:
R&D: Research and development spend – investment in developing new products, technologies, or capabilities.
M&A: Mergers and acquisitions spend – spending on acquiring or merging with other companies to expand scale, capabilities, or market access.
Capex: Capital expenditure – investment in long-term physical or intangible assets such as facilities, equipment, or infrastructure.
Discounted Cash Flow (DCF) model – a valuation method that estimates a company’s value by discounting its expected future cash flows back to today.
Terminal value – the estimated value of a business beyond the explicit forecast period in a DCF model.
Terminal growth rate – the assumed long-term, steady growth rate used to calculate terminal value.
EV: Enterprise Value – a measure of a company’s total value, calculated as market capitalisation plus net debt
EBITDA: Earnings before interest, taxes, depreciation and amortisation