‘Altered Experience’ Fund Brings Psychedelics to U.S. ETFs

Curious investors looking for new experiences in the $6.3 trillion U.S. exchange-traded fund market can now dabble in the world of psychedelic drugs.

The Defiance Next Gen Altered Experience ETF began trading Friday under the ticker PSY, offering exposure to firms involved in “the next generation of medicine, including psychedelics, cannabis and other psychedelic-derived treatments,” according to a statement.

Although a similar product launched in Canada in January, the Defiance fund will be a first for the exchange-traded fund industry in the U.S. This version will track the BITA Medical Psychedelics, Cannabis and Ketamine Index, which includes companies that conduct federally legal medical activities with psychedelics, cannabis and ketamine.

“The focus of this is the medical aspect around psychedelics and mental health -- we’re seeing a lot of breakthroughs,” Paul Dellaquila, president of Defiance ETFs, said in an interview. “You’re seeing some of the bigger companies get involved in this type of treatment. Johnson & Johnson has a treatment that is ketamine-based for depression.”

Its top positions are in Charlottes Web Holdings Inc. and Aurora Cannabis Inc. During its first day trading, the fund rose 4.1%.

Despite poor performance, the Canadian product -- Horizons Psychedelic ETF (PSYK) -- has attracted about $50 million since its January launch, even as it plunged almost 20% amid a broader selloff in speculative bets. Top holdings in the fund include Seelos Therapeutics Inc., Mind Medicine MindMed Inc. and Cybin Inc.

Horizons ETFs has filed for a sister psychedelics ETF for U.S. markets, also trading under the ticker PSYK, although it has not yet been approved by U.S. regulators.

The market for psychedelic drugs is worth only about $2.8 billion but is growing rapidly and expected to reach $7.6 billion by 2028, according to Data Bridge Market Research.

“With cannabis becoming more accepted across the U.S., we believe the door is opening wider for alternative drugs, especially as substitutes for opioids,” wrote Eric Balchunas, ETF analyst for Bloomberg Intelligence, in a note.

©2021 Bloomberg L.P.

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