Horizons ETFs will begin offering investors exposure to the rising psychedelics market with the launch of a brand-new fund.
Psychedelics investing is reaching its next milestone as the first exchange-traded fund (ETF) entirely dedicated to the growing space gets ready to debut.
The Horizons Psychedelic Stock Index ETF will begin trading on Wednesday (January 27) under the ticker symbol PSYK. The fund will offer exposure to a basket of psychedelics companies listed in North America.
PSYK was officially confirmed by Horizons ETFs Management (Canada) last Friday (January 22) after speculation had grown based on public documents filed by the fund manager.
Steve Hawkins, CEO of Horizons ETFs, said his firm started taking a closer look at the space about this time last year, but it wasn’t until recently that Horizons ETFs decided to pursue the creation of PSYK.
A combination of factors led to that decision rather than one specific event, although Hawkins told the Investing News Network (INN) that the recent public listings for psychedelics companies Mind Medicine (MindMed) (NEO:MMED,OTCQB:MMEDF) and Cybin (NEO:CYBN) helped push the fund’s creation over the finish line. “Those were probably the two big triggers for us,” the executive explained.
Jos Schmitt, president and CEO of the NEO Exchange, which will be the home of PSYK, told INN the launch of the fund is very exciting for the entire industry.
“Being able to invest in an ETF is going to give exposure to a portfolio of companies. I think that is going to be very interesting for many investors,” the exchange executive said.
Schmitt credited Horizons ETFs for being at the forefront with this new fund, and said the timing of the launch had to be precise as more significant companies hit the stock market.
“It’s about the vision, capability and the timing when you launch something like (this ETF),” said Schmitt.
Similar to other funds from Horizons ETFs, PSYK will act as an index offering direct exposure to the emergent sector. The new psychedelics fund will use a proprietary index owned by Horizons ETFs, dubbed the North American Psychedelics Index.
According to the existing index information, the ETF will hold the following companies as of its launch:
- AbbVie (NYSE:ABBV)
- Compass Pathways (NASDAQ:CMPS)
- Entheon Biomedical (CSE:ENBI,OTC Pink:ENTBF)
- Field Trip Health (CSE:FTRP)
- Greenbrook TMS (TSX:GTMS)
- HAVN Life Sciences (CSE:HAVN)
- Johnson & Johnson (NYSE:JNJ)
- Mind Cure Health (CSE:MCUR,OTCQB:MCURF)
- Mydecine Innovations (CSE:MYCO,OTC Pink:MYCOF)
- Nova Mentis Life Science (CSE:NOVA,OTC Pink:LIBFF)
- Numinus Wellness (TSXV:NUMI)
- Psyched Wellness (CSE:PSYC)
- Red Light Holland (CSE:TRIP)
- Revive Therapeutics (CSE:RVV,OTC Pink:RVVTF)
- Seelos Therapeutics (NASDAQ:SEEL)
While the decision was made to admit big-name pharmaceutical companies involved in psychedelics-related work, Hawkins told INN he wants the fund to mostly represent psychedelics companies.
The executive said the major pharma companies will be hard capped at a weight of 5 percent each. Overall, big pharma names will also be capped at a 20 percent margin for the entire weight of the fund.
Like other Horizons ETFs funds, PSYK will be rebalanced on a quarterly basis, meaning each quarter the fund manager will oversee the addition or removal of names based on the rules put in place.
According to the ETF firm, the new fund will deem a company eligible to be added to the fund based on the following parameters:
- Is listed on a regulated stock exchange in Canada or the US
- Operates as a producer and/or supplier of psychedelic medicines
- Is a biotechnology company engaged in the research and development of psychedelic medicines
- Is a company acting within the supply chain or distribution of psychedelics
Investing in psychedelics has grown as a proposition with real momentum for investors looking for an emerging drug market on the fringes of medical research, but with the potential to upend the current lineup of mental health treatments.
While still early on, 2021 is shaping up to be a critical year for psychedelics investing, and now with the launch of PSYK more investors may be lining up to take a closer look.
Stepping stones pile on for psychedelics industry
This week’s ETF launch represents another potential boost for psychedelic investments following one of the biggest stock debuts for the sector last year.
“It’s shown to the world what insiders have known for a long time — that this vision of bringing psychedelic medicine to the world isn’t a pipe dream, it’s very real and it’s happening now,” Michael Hoyos, co-founding partner, Americas, with the Conscious Fund, told INN on the launch of Compass Pathways and its impact for the space.
While there is still room to grow for psychedelics investments, experts have already started to identify the key aspects investors should investigate before placing any bets.
Remarking on comparisons between psychedelics and cannabis, Hawkins said Horizons ETFs sees “many similarities between (the cannabis) industry in 2017, when it was in its infancy, to the psychedelics industry now.”
Hawkins added that he views psychedelics as having the potential for significant growth, similar to what investors have seen from cannabis in the past few years.
The investment proposition of the psychedelics industry is what led Horizons ETFs to launch its new fund, but Hawkins emphasized that the industry’s tantalizing medical prospects are also key.
In a statement, he said Horizons ETFs believe psychedelics have a compelling investment case in addition to the “potential to provide life changing impact for those suffering with mental illness.”
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Cybin, Mind Cure Health, Numinus Wellness, Red Light Holland and Revive Therapeutics are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.