More psychedelics ETFs
The United States is set to get its third psychedelics ETFs, which will compete for the shortest ever name for a fund.
The PSYK ETF (PSYK) – that’s the name, just those seven letters – will track the Enhanced Consciousness Index, which will be calculated by Solactive. It will be issued by Exchange Traded Concepts, the white labeller, and advised by Elemental Advisors.
The index is made up of 25 companies that are developing psychedelic compounds or ketamine. (Yes, the horse tranquiliser). The investment rationale for these drugs is that they can be used to treat mental illnesses and nervous system ailments. Elemental says it has no interest in recreational drug use, and companies catering to recreational psychedelics will be removed.
Psychedelics companies are identified the usual way, through keyword searches (control + F) – what Solactive calls “Artis”.
The fund charges 0.75%, but one of those temporary fee waivers lowers it for the first year.
Bernie’s commentary – dip buying; competitor funds; Hugh Hendry
There are a few comments to be made about this launch.
- Psychedelics ETFs have been unpopular in the US. The other two (PSY, PSIL) hold just $8M and $6M each. Making this category very different from marijuana, which holds billions in both the US and Canada.
- Psychedelics have been hamstrung by regulatory issues. There isn’t a popular grassroots movement pushing to legalise psychedelics in the way that there is for marijuana (i.e. the global marijuana march). Meaning the regulatory issues could be more enduring. This marks another difference.
- Psychedelics ETFs have performed terribly this year. They have all lost something between 60 – 70% of their value. This is largely because they are unprofitable. Small biotech, SPACs, space stocks, and other unprofitable pockets have also been hammered as discount rates rise.
- Scottish hedge fund manager Hugh Hendry once argued that successful investing consisted in finding “a contentious premise outside the existing belief system, and have it go on and be adopted by the rest of the financial community”. This was certainly true of the ETF industry itself; ETFs weren’t always mainstream. It was very true recently of crypto. Maybe it will be true for psychedelics too.