In an industry that has long prided itself on making virtually every niche, strategy, theme and corner of the market available to investors, the ETF market may have just topped itself yet again.
Last Friday, the Defiance ETFs group filed with the SEC for the launch of the Defiance NextGen Altered Experience ETF (PSY). Yes, you're reading that right now and the name is exactly what it sounds like.
The Index is a rules-based index that tracks the performance of a portfolio of life sciences companies conducting federally legal medical activities in the psychedelics, medical cannabis, hemp, and cannabidiol (“CBD”) industries whose common stock or depositary receipts are listed on a U.S. or Canadian exchange.
Psychedelic drugs, also known as hallucinogens, are a group of substances, including psilocybin, that are used to change and enhance sensory perceptions, thought processes, and energy levels.
Medical cannabis, also known as medical marijuana, refers to the use of parts of the marijuana plant, such as hemp and the plant’s chemicals, for the treatment of a variety of diseases or medical conditions. Hemp is a type of cannabis plant whose stalks and seeds are used for a variety of commercial products.
The "Altered Experience" in the ETF name is an all-timer!
In practice, PSY will fit in nicely with the rest of Defiance's existing lineup of unique ETFs, including the Defiance NextGen Connectivity ETF (FIVG), Defiance Nasdaq Junior Biotechnology ETF (IBBJ), Defiance Next Gen SPAC Derived ETF (SPAK), Defiance Quantum ETF (QTUM). Defiance has forgone the usual ETF issuer path of offering up a balance of core holding funds with some that could get categorized sector, region, theme or smart beta ETFs. In reality, Defiance probably isn't all that dissimilar to ARK.
Comparing it to what already exists in the ETF marketplace, PSY will behave most similarly to the group of 7 marijuana ETFs. Its focus on medical marijuana, hemp and cannabidiol is already covered fairly well in existing products, but the addition of the psychedelics market for developing medicines and therapeutics to solve conditions, such as depression, anxiety, seizures and addiction, opens up opportunities within another unique sector. It's worth noting that PSY's underlying index plans to dedicate 35% of assets to psychedelics and 65% to cannabis.
The announcement of the Defiance ETF comes on the heels of the Horizons Psychedelic Stock Index ETF, which was recently approved in Canada and began trading at the end of January. Canada has often been a leader in the approval of ETFs covering sectors that were still a bridge too far for the SEC. Before pyschedelics, this was the case for marijuana ETFs. A pair of bitcoin ETFs were recently approved by our neighbors to the north and could help clear the path for similar funds here in the United States.
No word yet on the expense ratio or when the fund will be able to launch.