Canadian pension funds are starting to turn their formidable buying power toward cannabis stocks ahead of the government’s plan to legalize recreational marijuana this summer.

Several large Canadian pension funds have made early investments in cannabis companies, according to documents obtained by BNN Bloomberg, in a sign that the traditionally risk-averse investors are finally willing to diversify the retirement funds they manage into the volatile marijuana sector.

Provincial pension funds Alberta Investment Management Corp. and British Columbia Investment Management Corp. were among the group of over 50 investors who acquired stakes in Canopy Growth following the company’s $200.7-million bought deal financing in January, according to a list of investors obtained by BNN Bloomberg.

“When you think of someone managing their retirement money who is normally risk-averse now getting into cannabis, the perception of risk in this sector is likely to change,” said John Downs, director of business development for U.S.-based cannabis investment firm Arcview Group, in a phone interview with BNN Bloomberg.

A spokesman for AIMCo, which managed $95.7 billion in assets as of the end of Dec. 2016, declined to comment on the fund’s investments. Gwen-Ann Chittenden, a spokeswoman with British Columbia Investment Management Corp., which manages $135.5 billion in assets, confirmed the fund’s investment in Canopy but declined to specify how much the fund has invested in the company.

“Although BCI does not discuss our investment strategy or holdings, Canopy Growth is a passive investment held within our indexed fund that tracks the S&P/TSX Composite Index,” Chittenden wrote in an email to BNN Bloomberg. “BCI’s investment interest is aligned with the company’s weighting within the S&P/TSX Composite Index.”

Canada Post’s pension fund, which manages about $23.1 billion in assets, has also invested in Canopy, according to the documents. Representatives from Canada Post or the crown corporation’s pension fund couldn’t be reached for comment.

The size of the investments made into Canopy’s bought deal ranges between $1 million to $10 million, according to a person familiar with the matter.

Cannabis companies have enjoyed a flurry of interest over the past two years as investors take advantage of a lucrative market ahead of the Canadian government’s plan to legalize recreational marijuana usage later this year. The legal cannabis market in Canada was worth $5.7 billion last year, according to Statistics Canada. That market is expected to double to $12 billion by 2025, according to Cowan & Co.

More than 70 cannabis companies are publicly listed on the three main Canadian stock exchanges and count Canopy Growth, Aphria and Aurora Cannabis as some of the industry’s most actively traded stocks. The sector remains volatile as pot stocks have lost about a quarter of their value this year after surging nearly 70 per cent in 2017.

Still, the influx of pension fund investments in the cannabis sector is viewed by some analysts as akin to the industry-changing deal in October when Constellation Brands invested $245 million in Canopy Growth for a 9.9 per cent stake in the company. That investment spurred widespread interest in the cannabis sector as Constellation’s tie-up with Canopy provided a degree of confidence that was sorely needed for the industry to be taken seriously by retail and institutional investors.

“The next major milestone in the sector that is not revenue or distribution driven is when one major institutional investor takes more than a five per cent stake in a cannabis company,” said Bruce Linton, chief executive of Canopy Growth, in a recent phone interview with BNN Bloomberg. “That’s going to be a compounding effect and help other major investors pick more winners and losers. That’s when the sector is going to become more real.”

Vic Neufeld, chief executive officer of Aphria, the second-biggest cannabis company in Canada by market capitalization, also confirmed that his company counts some of “Canada’s leading pension fund managers” as investors in the company, but declined to specify who they are.

“Over the next six months, you’ll probably see an awakening of significant money managers coming into this space,” Neufeld said.

However, some Canadian pension funds remain on the sidelines.

The Canada Pension Plan Investment Board, Ontario Municipal Employees Retirement System and the Ontario Teachers' Pension Plan, haven’t made any investments in Canadian-listed cannabis firms, their respective spokespeople told BNN Bloomberg.

That could change in the coming months after legalization takes place and investor confidence drives down volatility within the sector, spurring pension funds to take larger positions in the cannabis space.

“I would expect as the sector matures that so does the investor base,” Graham Saunders, head of capital markets origination at Canaccord Genuity, wrote in an email to BNN Bloomberg.

The initial interest from pension funds could also result in a tougher investment environment for retail investors in the cannabis sector, Downs said.

“There’s going to be a whole new layer of large pools of capital looking at deals before they make their way down to the individual investor which will drive up valuations,” he added.