A third ETF is launching to try and capture the nascent psychedelics industry despite muted interest in predecessor funds.
The PSYK ETF (PSYK) launched on the NYSE Arca on Tuesday with an initial expense ratio of 0.75%. A waiver of 15 basis points expires on Jan. 25, 2023.
The fund tracks a Solactive index of up to 25 companies of at least $50 million in market capitalization that are deemed by an algorithm to be developing psychedelic or ketamine- derived treatments for disease and disorders. If fewer than 25 companies fit the index’s criteria, it will backfill the remaining slots with biopharmaceutical companies that aim to treat ailments of the central and peripheral nervous systems. It rebalances quarterly and reconstitutes annually.
Elemental Advisors is headed by Tim Collins, who currently lists himself as an investment professional at the Portland House Group and a former head of capital markets at a white-label ETF asset manager.
In a statement, Collins said the psychedelics industry has been hamstrung with regulatory issues, but he believes investing in companies purely interested in testing the drug class’ medical properties in clinical trials will give PSYK an advantage over its existing ETF rivals.
“There are no recreational products, focus or associated characteristics of any of the portfolio companies or activities included in this index,” he said.
PSYK will be several basis points more expensive than the index-based Defiance Next Gen Altered Experience ETF (PSY) at 0.75% and the actively managed AdvisorShares Psychedelics ETF (PSIL) at 0.68%. PSY counts cannabis companies in its investable universe, but PSYK and PSIL do not.
The two existing psychedelic funds haven’t garnered much attention from investors since launching in May (PSY) and September (PSIL) of last year, holding less than $15 million in combined assets under management.
PSY has lost 17.41% since inception, while PSIL has decreased 16.75%.