A New ETF Launches for Next-Gen Medicine

According to a report from ResearchAndMarkets, the global psychedelic drugs market could be worth $10.75 billion by 2027. And until then, it will grow at a compounded annual growth rate of more than 12%.

The sector is still in its infancy stages, which it makes it both very promising and risky. One way for investors to hedge some of that risk is to invest in an exchange-traded fund (ETF) that gives them some broad exposure. And Defiance Next Gen Altered Experience ETF (NYSEArca:PSY) can accomplish just that. It is the first psychedelic ETF to trade in the U.S. and launched just last week. However, the fund goes beyond just psychedelics.

Defiance ETFs says that investors will get "exposure to companies involved in the development of the next generation of medicine, including psychedelics, cannabis and other psychedelic derived treatments."

The top two stocks in the fund are from the cannabis sector as both Charlotte's Web (TSX:CWEB) and Aurora Cannabis (TSX:ACB)(NASDAQ:ACB) make up more than 7% of the fund's net assets. Psychedelics stock Compass Pathways (NASDAQ:CMPS) is also in the fund and at the number five spot, with a weight of about 5.6%. Mind Medicine (NASDAQ:MNMD) is a few spots further down.

However, the makeup of the ETF likely change as more psychedelic companies go public. Currently, there are just 20 holdings in the fund so investors won't get a whole lot of diversification just yet; in larger funds, stocks can make up just 1% or 2% of the total holdings.

The Next Gen Altered Experience ETF charges an expense ratio of 0.75%.