AdvisorShares has launched a new actively managed ETF providing exposure to companies developing therapeutic solutions using psychedelics.
Dan Ahrens, Chief Operating Officer of AdvisorShares.
The AdvisorShares Psychedelics ETF (PSIL US) has been listed on NYSE Arca and comes with an expense ratio of 0.68%.
A growing body of clinical research has demonstrated the potential use of psychedelic compounds, such as psilocybin and ketamine, as a treatment for a range of medical conditions including mental illness, depression, addiction, and post-traumatic stress disorder (PTSD), amongst many others.
This research has helped to break down regulatory barriers, most notably in Canada and the US, and resulted in a growing number of firms entering the psychedelics industry, creating the potential for a significant shift in the evolution of medicine.
Toronto-headquartered Horizons ETFs introduced the world’s first psychedelics-focused ETF in January of this year when it launched the passively managed Horizons Psychedelic Stock Index ETF (PSYK CN) on Canada’s NEO Exchange.
In May, Defiance ETFs launched the first US-listed ETF to target firms developing therapeutic solutions from psychedelics and cannabis. The Defiance Next Gen Altered Experience ETF (PSY US) has an expense ratio of 0.75% and tracks the BITA Medical Psychedelics, Cannabis, and Ketamine Index.
PSIL, however, is the first ETF globally to invest in the psychedelics space through an active management approach, a feature that AdvisorShares believes is essential due to the industry’s volatility, rapid evolution, and influx of new investment opportunities.
The fund invests in companies that derive the majority of their revenue from, or devote the majority of their assets to, psychedelics-based medical treatments. AdvisorShares notes that cannabis does not meet the ETF’s definition of a psychedelic drug.
Eligible types of firms include life sciences companies producing or distributing psychedelic medicines, biotechnology companies researching and developing psychedelic medicines, and healthcare companies providing psychotherapy treatments and mental health services using psychedelics.
AdvisorShares builds the portfolio by selecting companies with dominant market positions, firms with unique opportunities for growth, or out-of-favour stocks that are poised for a rebound.
Canadian stocks account for well over half (58.3%) of the total exposure followed by companies listed in the US (7.2%), the UK (6.9%), and Germany (7.7%). The fund has a strong small-cap leaning with junior stocks making up nearly three-quarters of the total allocation. Notable positions include Cybin (9.9%), ATAI Life Sciences (8.5%), Field Trip Health (8.5%), MindMed (8.3%), Compass Pathways (7.0%), Greenbrook TMS (6.3%), and Seelos Therapeutics (5.0%). (Data as of 15 September 2021.)
Dan Ahrens, Chief Operating Officer of AdvisorShares, said: “We believe that investing in select companies in the psychedelics space can provide a compelling long-term investment opportunity; however, this is also an area of the marketplace in its early innings. We feel that our active management and specialized approach can potentially help investors capture the early growth potential of psychedelics and its prominent promise on therapeutics and medical fields.”
Noah Hamman, Chief Executive Officer of AdvisorShares, added: “We believe that delivering this strategy in an ETF structure with daily transparency, intraday liquidity, and operational efficiency provides an ideal way for advisors and investors to access this burgeoning market. As we continue to navigate highly specialized areas of the marketplace, we also remain steadfastly committed to providing ongoing investment education for our ETF shareholders, prospective investors, and the investment community at large.”