Elemental Advisors just launched the PSYK ETF (NYSE Arca: PSYK), a thematic ETF focused on the emerging use of psychedelic compounds in treating mental health issues. Tim Collins, a founder and president of Elemental Advisors, recently provided some insight as to why the company decided to make this its first issued ETF, how the medicinal psychedelic drug market has evolved over the years, and why he believes the use of psychedelics will improve the way we treat mental health.
ETF Trends: Tell us about PSYK and what it does.
Tim Collins: PSYK provides investors with a vehicle to participate in the rapidly expanding use of pharmacologically derived compounds for use in the production of prescription-based medications and other physician-directed therapeutics. These are highly regulated companies and products, and the exposure provided is narrowly focused. The [Enhanced Consciousness] Index will not seek to include recreational or non-medical compounds or therapies, including cannabis.
ETF Trends: What made you decide to invest in the psychedelics space?
Tim Collins: I’ve been involved in ETFs for over 20 years. This is the first product we’ve pursued at Elemental Advisors on an individual level. We’ve been looking for suitable candidates to list an ETF with. We’ve looked at exotic metals, precious metals, we were early lookers at cannabis. But for various reasons, we took a pass on all of these. When we took a closer look at the psychedelics space, we got very excited about the news that was coming out from there.
Mental health issues affect one in five Americans. Treatment is tremendously costly, and therapeutics are lacking. The success rate of traditional treatments of mental health are low. The current research and clinical trials involving psychedelics look very promising. The use of psychedelics with a therapist assisting in the dosage and treatment is a new paradigm that has the potential to dramatically change the way mental health is treated. It looked like a good time to jump in with both feet.
ETF Trends: How has the medicinal psychedelic drug market evolved over the years?
Tim Collins: Psychedelics were widely studied in the 1950s, but were later outlawed in the ‘70s, so there was a long period of there being no research on the subject. But recent developments, including growing societal and regulatory acceptance of psychedelics, have led to a resurgence in research and development. Success is breeding success, and more universities, research institutes, and private initiatives are being announced continually. There are now numerous clinical trials in various stages of FDA approval. So, the results that we’re seeing, though early, are pretty astounding.
ETF Trends: Does PSYK have any exposure to cannabis?
Tim Collins: PSYK does not have any cannabis exposure to provide additional portfolio liquidity. Cannabis names are an increasingly difficult segment of the market to trade due to legal and regulatory ambiguity, which we don’t believe is the case with the medicinal psychedelic marketplace. While some of our competitors have made the decision to supplement the liquidity with cannabis names, we have made a concerted effort to avoid that exposure.
ETF Trends: Why did you feel that now is the right time to invest in psychedelic compound companies?
Tim Collins: We’ve seen a couple billion-dollar listings in the past 12 to 18 months. Plus, venture capital pipelines are chock-full of companies. And there’s not really a good way for a retail investor to access that.
ETF Trends: What are your long-term goals for the ETF?
Tim Collins: One of the challenges in the space is that the market hasn’t matured enough to support an entire basket of such companies. So, we have to cast a wider net to include exposure to ancillary sectors to fill out the portfolio. Elemental Advisors has chosen to utilize an RBICS industry group “Neurology Biopharmaceuticals.” [RBICS is the Revere Business Industry Classification System, a structured taxonomy created by FactSet.] The current level of RBICS exposure in PSYK is 36% of the total portfolio weight. The index is also designed so that, as more psychedelic names mature and reach inclusion thresholds, the RBICS portion of the fund will, by index rules, decrease. So, in 20 years, we’re hoping to have a pure-play psychedelics fund.
For more information, visit www.psyk-etf.com.
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