PSIL: 2nd Quarter 2024 Portfolio Review
Portfolio
Performance
During the second quarter of 2024, PSIL experienced declining performance, highlighting the susceptibility of this small sector to market volatility. The net asset value (NAV) fell by 31.77%, while the S&P 500 actually increased for the same period.
Portfolio
In Q2, the portfolio holdings remained stable with no new positions added or fully removed. Tactical adjustments included increasing the shares of Cybin Inc. (CYBN) to 9.00% of the portfolio and Mind Medicine Inc. (MNMD) to 15.94%. Shares of NRX Pharmaceuticals Inc. (NXRP) and Seelos Therapeutics Inc. (SEEL) were reduced to 4.70% and 0.95% of the portfolio, respectively.
Winners / Losers
During the quarter, Clearmind Medicine Inc. (CMND) achieved a remarkable increase of 46.09%, and GH Research PLC. (GHRS) also recorded substantial gains of 9.38%. On the downside, other portfolio holdings underperformed with Seelos Therapeutics Inc. (SEEL) experiencing a steep decline of 88.13% and Psyence Biomedical Ltd. (PBM) dropping by 73.68% over the same period.
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| MNMD | MIND MEDICINE MINDMED INC | 15.94% |
| CYBN | CYBIN INC | 9.00% |
| CMPS | COMPASS PATHWAYS PLC | 6.55% |
| ALKS | ALKERMES PLC | 4.89% |
| RLMD | RELMADA THERAPEUTICS INC | 4.81% |
| ATAI | ATAI LIFE SCIENCES NV | 4.76% |
| NRXP | NRX PHARMACEUTICALS INC | 4.70% |
| GHRS | GH RESEARCH PLC | 4.69% |
| ITCI | INTRA-CELLULAR THERAPIES INC | 4.52% |
| IXHL | INCANNEX HEALTHCARE INC | 4.19% |
As of 6.30.2024. Cash is not included. Subject to change.
Please see our complete fund holdings at advisorshares.com/etfs/psil. The holdings details are updated each market day.
Psychedelics Landscape
Investing in psychedelics is a volatile venture, as highlighted by the sector’s performance in Q2. The industry, still in its early stages, is marked by companies primarily engaged in research and development of psychedelic therapies that have yet to gain widespread acceptance or regulation. This leads to significant market fluctuations, driven by shifts in investor sentiment influenced by regulatory updates, clinical trial outcomes, and broader market conditions.
The psychedelic market is particularly sensitive to legal and political changes. For instance, the FDA’s rejection of MDMA for PTSD (post-traumatic stress disorder) treatment due to concerns over manipulated trial data underscores the regulatory challenges faced by companies in this sector. However, the 2024 National Defense Authorization Act’s authorization for the Department of Defense to study psychedelics within the military population signals a changing landscape. Legal frameworks are slowly evolving, with several U.S. cities decriminalizing psychedelics.
Public interest in alternative mental health treatments remains strong. A RAND Corporation report suggests that about 3% of the U.S. population, or approximately 8 million adults, used psilocybin in 2023. Internet search trends on microdosing have surged by 1,250% since 2015, and a psilocybin retreat in Vancouver, Canada, has seen a 183% increase in bookings year over year.
Internationally, the European Union has launched PsyPal, a study exploring psilocybin-assisted therapy for anxiety and depression. The study, involving 9 European countries and aiming to recruit around 100 patients, is set to begin dosing in January 2025 and run for two years.
The regulatory hurdles and the ongoing legal status of psychedelics in many jurisdictions add layers of uncertainty. The success of investments in this sector often depends on the outcomes of clinical trials and approval processes, which can be unpredictable and lengthy.
The relatively small size and niche focus of many companies in the psychedelics industry can result in greater price volatility. These companies may also face challenges in securing funding and achieving scalability, further contributing to the sector’s instability, as well as challenges in patenting psychedelic molecules. While the potential for high returns exists, the psychedelics market is characterized by substantial risks and fluctuations, making it a highly volatile investment arena.
We want to always remind people to think about how they want to invest in the psychedelic space as PSIL is designed to be fully or mostly fully invested. It is not a tactical strategy. If an investor wants to have a more aggressive risk managed approach to investing in this space, they should have a plan and `strategy to trade around PSIL. Regardless of the type of investor you are, we appreciate your investment and trading of PSIL as we work to grow the ETF and raise awareness of this industry and its investment opportunities.
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To get updates on the funds, tune in to AdvisorShares’ AlphaNooner Show streaming live each regular weekday starting at 12:00 pm (East Coast time), where I am a guest almost every Tuesday. Other important guests from the psychedelics world often join too. Find it on most major social media platforms or visit our the AdvisorShares “Events” webpage for more information.
Cheers,Past Commentary
Definitions:
The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus or summary prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.
There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested.
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. Psychedelic medicines, therapeutics, and healthcare treatments may be used in the treatment of illnesses such as depression, addiction, anxiety and post-traumatic stress disorder. Psychedelic medicine companies include life sciences companies having significant business activities in, or significant exposure to, the psychedelics industry including producers or distributors of psychedelic medicines, biotechnology companies engaged in research and development of psychedelic medicines, and companies that are part of the supply chain for psychedelics.
Psychedelics Companies Risk. Psychedelics companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may significantly affect a psychedelics company’s ability to secure financing, impact the market for psychedelics and business sales and services, and set limitations on psychedelics use, production, transportation, and storage. There can be no guarantees that such approvals or administrative actions will happen or be favorable for psychedelics companies, and such actions may be subject to lengthy delays, and may require length and expensive clinical trials. Additionally, therapies containing controlled substances may generate public controversy. Political and social pressures and adverse publicity could lead to delays in approval of, and increased expenses for, companies and any future therapeutic candidates they may develop. All of these factors and others may prevent psychedelics companies from becoming profitable, which may materially affect the value of certain Fund investments. In addition, psychedelics are subject to the risks associated with the biotechnology and pharmaceutical industries.
In Canada, certain psychedelic drugs, including psilocybin, are classified as Schedule III drugs under the Controlled Drugs and Substances Act (“CDSA”) and, as such, medical and recreational use is illegal under Canadian federal laws. In the United States, certain psychedelic drugs, including psilocybin, are classified as Schedule I drugs under the Controlled Substances Act (“CSA”) and the Controlled Substances Import and Export Act (the “CSIEA”) and, as such, medical and recreational use is illegal under the U.S. federal laws. There is no guarantee that psychedelic drugs or psychedelic-inspired drugs will ever be approved as medicines in either jurisdiction.
In the United States, scheduling determinations by the Drug Enforcement Agency (“DEA”) are dependent on Food and Drug Administration (“FDA”) approval of a substance or a specific formulation of a substance. Unless and until psilocybin, psilocin, or other psychedelics-based products receive FDA approval, such products may be prohibited from sale, which could limit the growth opportunities for certain portfolio companies of the Fund. Even if approved by the FDA, the manufacture, importation, exportation, domestic distribution, storage, sale, and legitimate use of such products will continue to be subject to a significant degree of regulation by the DEA.
Security prices of small cap companies may be more volatile than those of larger companies and therefore the Fund’s share price may be more volatile than those of funds that invest a larger percentage of their assets in securities issued by larger-cap companies. These risks are even greater for micro-cap companies.
Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.
Holdings and allocations are subject to risks and change.
The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.