For investors who can’t decide which company in the fledgling psychedelics and medical marijuana field to invest in, Defiance ETF last Friday listed a new fund comprising a grab bag of such companies.
The Midtown-based sponsor of exchange-traded funds launched the Defiance Next Gen Altered Experience ETF on the New York Stock Exchange under the ticker symbol $PSY. The fund is a first in the U.S. and comprises companies developing psychedelics, medical marijuana, ketamine and other schedule-controlled drug treatments. The first ever in North America was the Psychedelics Stock Index ETF from Toronto-based Horizons ETF.
“If you were to think of different ways to slice traditional sectors for investors, psychedelics is a great way to get into the biotech space,” said Paul Dellaquila, president of Defiance.
The fund is weighted across 20 companies in the holdings to mitigate the risk of overexposure to any single firm and follows the rules of the BITA Medical Psychedelics, Cannabis and Ketamine Index. To be included in the holdings, companies had to have a minimum market capitalization of $75 million and be listed on U.S. and Canadian stock exchanges. As more startups meet the criteria over time, they can be added to the list, Dellaquila said.
Several local developers were included in the fund. World Trade Center–based MindMed, a developer of LSD and psychedelics-based treatment, holds a weight of 5.24%; Midtown-based Seelos Therapeutics, whose pipeline includes ketamine for depression, is weighted at 4.58%; and Kips Bay-based FieldTripHealth, a medically-assisted psychedelics therapy clinic, carries 4.17%.
The expense ratio—the amount an investment company charges to manage the portfolio—of $PSY is 0.75%, which is the highest among the firm’s various ETFs, ranging from 0.3% to 0.45%.
“There is more cost associated with this fund,” Dellaquila said.
Trading those small market capitalization companies is more expensive, and Defiance needed an outside legal counsel for this fund, he explained.
“However, [the expense ratio] is in line with market rates,” he noted.
In comparison, the Canadian psychedelics ETF’s management fee is 0.85%.
Defiance was founded in 2018 and specializes in ETFs focused on next-generation technologies. In October it launched a first-of-its-kind fund focused on special-purpose acquisition companies, also known as blank-check companies, and it has funds with holdings in 5G telecommunications technology, hydrogen fuel and quantum computing.
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