The New Defiance "Psychedelic" ETF Is New But Not Groundbreaking

Image by Okan Caliskan from Pixabay

The supposedly first and, supposedly, a "psychedelic" stocks ETF, was launched in the U.S. on May 27th. but it is not a true psychedelic stocks ETF nor is it the world's first psychedelic ETF. Here's what it really is.

The Defiance Next Gen Altered Experience ETF (PSY) is a welcome addition to the investment landscape but it is NOT the first psychedelic drug stocks ETF on the investment scene. The Horizon's Psychedelic Stock Index ETF (PSYK/HPSYF) was listed on the Canadian NEO stock exchange back on January 27th, 2021.

In addition, the Defiance psychedelic stocks index is NOT a true psychedelic stocks ETF like PSYK because, while it states that its focus is on investing in clinical-stage companies looking for ways to treat mental illnesses using psychedelic compounds, in actual fact only 30% of its ETF constituents are doing research in that area. The other 70% of the companies are concentrated on doing research using THC and/or CBD cannabis or ketamine (a fast-acting painkiller that can potentially treat major depression). 

The Defiance Next Gen Altered Experience ETF says that it:

• looks to track the BITA Medical Psychedelics, Cannabis, and Ketamine Index,
• that its constituents must be connected to the medical psychedelics, medical cannabis, or ketamine industries in some way and
• that companies in the index must have a market cap of at least $75 million.

The ETF:

• consists of 20 constituents of which
  • only 6 are psychedelic drug companies, namely: 
    • Cybin (CLXPF); Numinus (LKYSF); Red Light (TRUFF); Seelos (SEEL); Field Trip (FTRPF) and Mind Medicine (MNMD)
  • the remaining 14 drug companies are cannabis-focused
• has an expense ratio of 0.75%,
• has a CUSIP #26922B808 (Go here for more information on CUSIP)
• is listed on the NYSE under the symbol PSY
• has net assets of $3.43M and
• has 125,000 shares outstanding

If you understand the limitations of the Defiance Next Gen Altered Experience ETF then it, nevertheless, provides diversification, reduced trading costs, and the need to monitor multiple positions as well as some exposure to the clinical-stage medical psychedelics and cannabis drug stock segment.