The Defiance Next Gen Altered Experience ETF allows investors to gain exposure to a basket of psychedelics and cannabis stocks.
Defiance’s latest ETF product focuses on medical psychedelics and cannabis companies, trading under ticker symbol PSY on NYSE Arca; the world’s largest ETF exchange.
Importantly, its listing on the New York-based exchange provides convenient access for U.S. investors, in contrast that launched earlier this year on the Canadian NEO Exchange.
In a summary prospectus filed with the SEC, Defiance set out the key terms of the ETF. The Next Gen Altered Experience ETF tracks an underlying index in a passive manner. In this case, the index is the BITA Medical Psychedelics, Cannabis, and Ketamine Index.
The index includes public companies listed on a U.S. or Canadian exchange that derive at least half their revenue from the medical psychedelics, cannabis, or ketamine industries.
The inclusion of Canadian-listed stocks is believed by the index sponsor to be important in capturing key players in the medical psychedelics and cannabis sectors, given their geographic skew.
Companies must meet some other requirements, such as a minimum market cap of $75m and certain liquidity profiles.
At launch, 21 companies are included in the Index and thus the ETF, including Compass Pathways, MindMed, Numinus and Cybin.
The majority of these 21 companies are in the medical cannabis field, as an aggregate weight of 35% of the underlying index is assigned to psychedelics healthcare companies, while 65% is assigned to medical cannabis companies. The index will be periodically rebalanced to ensure that no one company can occupy greater than 7% of the index.
Based in New York, Defiance ETFs operates a number of ETFs covering disruptive sectors such as quantum computing (QTUM), small cap biotechs (IBBJ), and 5G (FIVG). The latter ETF had approximately $1.2bn under management as of May 28, 2021.
The launch of this ETF may signal growing investor interest in psychedelics, and seeks to provide U.S. investors greater access to the emergent market.
Notes and Resources
Further Reading and Resources:
- Defiance’s Investment Case
- Next Gen Altered Experience ETF Fact Sheet
- BITA Index Methodology Guide Book
Holdings, as of May 28, 2021:
Fund holdings are subject to change and should not be considered recommendations to buy or sell any security.
The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.
Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index.
A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in Psychedelics Healthcare and Medical Cannabis companies. Such companies may depend largely on the government regulation and their profitability can be significantly affected by restriction on government reimbursements for medical expenses, rising costs of products and services, pricing pressure, limited product lines, intellectual property rights, and long and costly government product approval processes. The investments rely on U.S. and Canadian regulation of psychedelic, healthcare and cannabis, and the fund could be adversely affected by changes in these regulations.
The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.
PSY is new with a limited operating history.
The BITA Medical Psychedelics, Cannabis, and Ketamine Index is a rules-based index that tracks the performance of companies, listed in North American Exchanges, that operate business models focused on the usage of Psychedelics, Medical Cannabis, and Ketamine for medicinal and health treatment purposes. The index is owned, calculated, administered and disseminated by BITA GmbH. It is not possible to invest directly in an index.
Commissions may be charged on trades.
PSY is distributed by Foreside Fund Services, LLC.
