Canada has a 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.
Invest In Psychedelic Stocks
Gain diversified exposure to the burgeoning psychedelics industry through an ETF that tracks the performance of multiple life science companies.
- 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
- High M.E.R
- Unproven industry
What Is PSYK?
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 $6.34.
PSYK Key Facts
As of Dec 31, 2021:
- Ticker Symbol: PSYK.NE
- Exchange: NEO Exchange
- Assets Under Management: $11.56 Million
- MER: 1.16%
- 12-Month Trailing Yield: 1.04%
- Currency Traded: CAD
- Registered Accounts Availability: Yes
Unique Features of Horizons PSYK ETF
- First-Mover Advantage: Being the world’s first ETF in this sector, Horizons PSYK has the advantage of setting the industry standard and attracting early investors keen on this new frontier.
- Adaptability: Given the rapidly evolving nature of the psychedelics industry, the ETF’s portfolio is periodically reviewed and adjusted to include emerging market leaders and exclude laggards or companies that have shifted their core focus.
- Educational Initiatives: Recognizing that the world of psychedelics is unfamiliar to many potential investors, Horizons PSYK often undertakes educational initiatives. These range from webinars to whitepapers that delve deep into the science, legality, and investment potential of psychedelics.
- Ethical Considerations: The fund recognizes the ethical concerns surrounding psychedelics and strives to include only companies that prioritize patient safety, ethical sourcing, and other responsible business practices.
- Financial Health Screening: Before including a company in the ETF, its financial health, including revenue streams, profitability metrics, and debt loads, is thoroughly examined. This ensures that the ETF isn’t just riding the psychedelics hype but is grounded in solid financial fundamentals.
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:
As of September 30, 2023:
| 1mo | 3mo | 6mo | YTD | 1 yr | SIR** | |
|---|---|---|---|---|---|---|
| Horizons Psychedelic Stock Index ETF | -11.78 | -11.59 | -6.25 | -10.63 | -41.72 | -50.39 |
| North American Psychedelics Index | -11.10 | -10.85 | -4.11 | -3.72 | -37.00 | -48.93 |
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 October 12, 2023:
| Asset Class | Net | Short | Long | Cat. | Index |
|---|---|---|---|---|---|
| Canadian Equity | 33.52 | 0.00 | 33.52 | 14.89 | 3.17 |
| U.S. Equity | 29.10 | 0.00 | 29.10 | 69.55 | 59.28 |
| International Equity | 36.96 | 0.00 | 36.96 | 12.95 | 37.50 |
| Fixed Income | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Other | 0.00 | 0.00 | 0.00 | 0.49 | 0.05 |
| Cash | 0.42 | 0.09 | 0.51 | 7.00 | 0.00 |
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 Name | Weight |
|---|---|
| CYBIN INC. | 19.47% |
| ATAI LIFE SCIENCES NV. | 10.33% |
| FSD PHARMA INC CL B SUB VTG NEW | 9.62% |
| GH RESEARCH PLC. | 9.56% |
| Relmada Therapeutics Inc | 9.32% |
| MIND MEDICINE MINDMED INC | 8.69% |
| COMPASS PATHWAYS PLC ADR | 8.58% |
| Numinus Wellness Inc | 7.73% |
| Abbvie Inc | 5.98% |
| Johnson & Johnson | 5.53% |
Horizons PSYK Sector Weighting
| Sectors | Investment % | Cat % |
|---|---|---|
| Basic Materials | 0.00 | 1.78 |
| Consumer Cyclical | 0.00 | 4.28 |
| Financial Services | 0.00 | 2.15 |
| Real Estate | 0.00 | 0.28 |
| Communication Services | 0.00 | 7.07 |
| Energy | 0.00 | 2.07 |
| Industrials | 0.00 | 2.83 |
| Technology | 0.00 | 30.12 |
| Consumer Defensive | 0.00 | 2.27 |
| Healthcare | 100.00 | 35.96 |
| Utilities | 0.00 | 11.19 |
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:
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
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.
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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.
