Horizons PSYK ETF Review (Sep 2022): The World’s 1st Psychedelics ETF

Canada has the reputation for innovation with its exchange-traded funds (ETFs). The world’s first Bitcoin ETF was listed on a Canadian stock exchange.

And now, the world’s first ETF for psychedelic drug companies is the latest of the many firsts introduced by Canada in the financial world.

Psychedelics are a controversial topic, but it is no secret that they are becoming increasingly popular worldwide. A lot more money is being poured into the research of the potential mental health benefits of the drugs.

This Horizons PSYK ETF review will take a closer look at the new fund to help you determine whether it would be a worthwhile investment for you to consider.

Our Verdict
Horizons PSYK ETF Review
7/10Our Score

Horizons PSYK ETF

Invest In Psychedelic Stocks 

Gain diversified exposure to the burgeoning psychedelics industry through an ETF that tracks the performance of multiple life science companies.

Pros
  • Can be used to express a sector view
  • Safer exposure to a basket of psychedelics industry companies
  • Capitalizes on a growing industry
  • First ETF to offer exposure to the nascent psychedelics industry
  • Offers geographical diversification
Cons
  • High M.E.R
  • Unproven industry

What Is PSYK?

horizons logo

The Horizons Psychedelic Stock Index ETF is a financial instrument that launched on the TSX on January 26, 2021, and it is designed to emulate the performance of the North American Psychedelics Index.

Horizons PSYK ETF is available on the NEO Exchange, and it is managed by Horizons ETF Management, one of the most prominent ETF providers in Canada.

Horizons PSYK is a relatively new ETF, capitalizing on the growing psychedelics industry. Horizons PSYK ETF is the world’s first ETF to focus on companies with operations related to psychedelic drugs, making it a unique offering by Horizons.

PSYK.NE is currently trading at close to $11.41.

PSYK Key Facts

As of Dec 31, 2021:

  • Ticker Symbol: PSYK.NE
  • Exchange: NEO Exchange
  • Assets Under Management: $25.39 Million (As of Aug 17, 2022)
  • MER: 0.99%
  • 12-Month Trailing Yield: 1.04%
  • Currency Traded: CAD
  • Registered Accounts Availability: Yes

Horizons PSYK ETF MER And Fees

Horizons PSYK ETF is a pricier ETF than many other products, with a Management Expense Ratio (MER) of 0.99%.

Horizons PSYK Dividend Yield

Horizons PSYK’s dividend yield:

  • 12-month trailing yield: 1.04%
  • Distribution yield: 0.42%

Horizons PSYK Performance And Returns

Growth of a hypothetical $10,000 since the inception of Horizons PSYK:

Horizons PSYK

As of July 31, 2022:

1mo3mo6moYTD1 yrSIR**
Horizons Psychedelic Stock Index ETF9.930.74-26.88-38.05-66.30-53.76
North American Psychedelics Index10.161.74-25.56-37.88-65.65-53.66
Source: HorizonsETFs.com

Go to the Horizons website for real-time performance numbers of PSYK.

What Does Horizons PSYK ETF Invest In?

Horizons PSYK ETF offers almost exclusive exposure to the psychedelics industry in North America.

Horizons PSYK Asset Allocation

As of July 31, 2022:

Asset ClassNetShortLongCat.Index
Canadian Equity33.520.0033.5214.893.17
U.S. Equity29.100.0029.1069.5559.28
International Equity36.960.0036.9612.9537.50
Fixed Income0.000.000.000.000.00
Other0.000.000.000.490.05
Cash0.420.090.517.000.00
Source: Morningstar.com

What Companies Are In The PSYK ETF?

Horizons PSYK invests in several life sciences companies that have significant business operations in or have exposure to the psychedelics industry. The fund allocates much of its total assets with relatively similar weight to most of its top ten holdings.

The top holding for the fund is Compass Pathways, accounting for 17.13% of its investments. Seelos Therapeutics Inc. comes in second, accounting for 12.69% of its holdings, and GH Research PLC. comes in third, with 10.83% of its assets allocated to the company.

Top ten holdings as of August 12, 2022:

Security NameWeight
COMPASS PATHWAYS PLC ADR17.13%
SEELOS THERAPEUTICS INC .12.69%
GH RESEARCH PLC .10.83%
ATAI LIFE SCIENCES NV .10.73%
CYBIN INC .9.14%
Revive Therapeutics Ltd8.23%
Numinus Wellness Inc7.36%
Field Trip Health Ltd7.26%
MIND MEDICINE MINDMED INC6.06%
Abbvie Inc4.21%
Source: HorizonsETFs.com

Horizons PSYK Sector Weighting

SectorsInvestment %Cat %
 Basic Materials0.001.78
 Consumer Cyclical0.004.28
 Financial Services0.002.15
 Real Estate0.000.28
 Communication Services0.007.07
 Energy0.002.07
 Industrials0.002.83
 Technology0.0030.12
 Consumer Defensive0.002.27
 Healthcare100.0035.96
 Utilities0.0011.19
Source: Morningstar.com

Ethical Concerns With Investing In Psychedelics ETF

There are understandable ethical concerns surrounding investing in an ETF that focuses primarily on publicly traded companies that have significant business activities in, or significant exposure to, the psychedelics industry.

However, the promising research into psychedelics suggests that it has possible applications to improve mental health. Psychedelics are already going mainstream, as the US FDA has also started supporting research on the possible treatments possible with certain psychedelic substances.

Much like how it was with marijuana 10-15 years ago, the psychedelics industry is also surrounded by controversy. Increasing research into the use of cannabis for recreational and medicinal purposes has shed light on the fact that it is, in fact, might be somewhat safe to consume. Marijuana is now available throughout the country.

The work that many of the companies held within the ETF focuses on researching the applications and safety of different psychedelic substances.

According to Horizons, the psychedelics industry was valued at approximately US$2 billion. By 2027, it predicts the sector to grow to roughly US$6.8 billion at a CAGR of 16.3%.

The fund focuses on investing in companies researching different psychedelic compounds as potential treatments for mental health issues which include, but are not limited to:

  • Drug-resistant depression
  • Anxiety
  • Addiction
  • Post-Traumatic Stress Disorder (PTSD)

If deemed effective as a treatment for mental health issues, psychedelics-based treatments could generate over US $16 billion in revenues by 2023.

As more research is being conducted on psychedelic substances, the greater level of awareness is slowly chipping away at the stigmatized perception of the substances, but there is still a long way to go for the proper research and safety standards to be put into place.

Since it’s a relatively new industry, it might make be challenging to determine which equity security can provide you with decent exposure to the psychedelics industry without too much capital risk.

Horizons Psychedelic Stock Index ETF (PSYK) seems that it can offer you exposure to a basket of such stocks without you having to worry about picking individual stocks.

Horizons PSYK Risk Indicator

PSYK is a high risk ETF:

Source: HorizonsETFs.com

Horizons PSYK ETF Alternatives

However, Horizons PSYK is as yet a unique offering in Canada due to its focus on the nascent psychedelics industry.

Horizons PSYK ETF vs. Defiance Next Gen Altered Experience ETF

Defiance Logo

The Defiance Next Gen Altered Experience ETF (PSY) is the world’s second ETF designed to provide investors with exposure to the psychedelics industry, along with cannabis and other psychedelic-derived treatments.

It is the first such ETF offering in the US, and it does not trade on any Canadian exchange.

PSY ETF focuses on a broader range of equity securities than Horizons PSYK ETF. It began trading on the New York Stock Exchange (NYSE) on May 28, 2021 and offers a lower 0.75% MER.

Many PSY ETF’s top holdings are similar to PSYK ETF, but the fund’s focus on psychedelic companies is not as significant as PSYK ETF.

Horizons PSYK ETF vs. Horizons HMMJ ETF

Horizons HMMJ ETF is another fund provided by Horizons ETF Management Canada. This fund seeks to replicate, to the extent possible, the performance of the North American Marijuana Index, net of expenses.

The constituent companies in the index consist of life sciences companies with significant business activities in the marijuana sector.

Horizons HMMJ ETF has been trading on the Toronto Stock Exchange (TSX) since April 2017, and it comes with a lower 0.85% MER compared to Horizons PSYK ETF, but it focuses on a different industry.

Horizons PSYK ETF vs. Horizons HMJR ETF

Horizons HMJR ETF is another fund provided by Horizons ETF Management Canada. The fund trades the NEO Exchange like Horizons PSYK ETF. It began trading in February 2018 and comes with a management fee of 0.85%. The investment firm has not highlighted the fund’s MER as of writing.

HMJR ETF seeks to replicate, to the extent possible, the performance of the Emerging Marijuana Growers Index, net of expenses.

The Index is designed to offer exposure to the performance of a basket of small market capitalization and publicly listed North American companies primarily involved in cultivating, producing, or distributing marijuana.

How To Buy Horizons PSYK ETF In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

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Qtrade
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Wealthsimple Trade
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  • Stock and ETF buys and sells have $0 trading fees
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Well-Rounded
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Excellent market research tools
  • Most types of registered accounts available

To learn more, check out my full breakdown of the best trading platforms in Canada.

Conclusion: Is Horizons PSYK A Good Investment For You?

A lot remains to be seen regarding Horizons PSYK and the broader psychedelics industry to determine where it is going. Horizons PSYK ETF is a speculative investment to consider at this point.

The ETF is slightly expensive due to its high management fee and MER.

If you are interested in capitalizing on the growth of the psychedelics industry, buying and holding PSYK could be an easy way to access it.

I will conclude this Horizons PSYK ETF review by saying that it is a fund you should have on your radar, even if you are not investing in it right away.

Not sold on ETFs and want to pick your own investments? Check out this list of the top psychedelic stocks in Canada.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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