ETF Spotlight: The first US Psychedelics ETF begins trading
ETF: Defiance Next Gen Altered Experience ETF (NYSE:PSY)
Launched last week, $PSY is an ETF that holds 20 companies in the production, distribution, or services related to psychedelics, medical cannabis, and ketamine for health treatments.
- ETF launch date: May 28, 2021
- Top 3 Holdings: Charlottes Web Holdings Inc (TSE:CWEB), Aurora Cannabis (NASDAQ:ACB), Cronos Group (TSE:CRON)
Other fund facts:
- ~$750m average market cap among the 20 companies on the list.
- Nearly 75% of the companies are higher-risk smaller cap companies (<$300m market cap)
- Nearly 50% of the companies aren’t making any revenue — i.e. products are still being developed and could be years away from seeing any sales.
What to expect? Lots of volatility. Both the psychedelics and cannabis industry are risky but $PSY is even riskier — holding smaller and lesser-known cannabis stocks (focus on CBD products).
- FDA approval for psychedelic-based depression treatment in the US is years away.
- None of the 7 psychedelic stocks in the ETF have a commercialized product.
Also: In Jan, a similar product was launched in Canada, the Horizons Psychedelics Stock Index ETF (NEO:PSYK). Unlike $PSY, the Canadian ETF only invests in psychedelics stocks.