Well, can a trillions. I'm Joel Weber, So Eric, we had this discussion about a new sector that I think is a really interesting one. Um. Marijuana has obviously had a ton of attention over the past decade and change now as it's become more and more legal, but psychedelics and mushrooms are sort of viewed as the next potential chapter. And we even have states in the US that are starting to legalize some of this, and there's even a need a new et F that's all about this. Yeah.
I remember I was at my dad's in Florida around the New Year's Eve weekend and I looked at my e t F clips, which I get sent from Google every day, and I was like, a psychedelic eat psychedelic stocks. I mean, what does that just mean? Like really cool stocks? And then I looked into it. I'm like, oh my gosh, um, it's it's track mushrooms. And then I did a little more research and it it's really crazy that there's a
whole shroom scene. If you go on Twitter, there's like a lot of people and it reminded me of like the early days of cannabis. I don't know, it's stuck out to me, and I was just very curious about it, especially because the company who did it is the one who kicked off the marijuana E t F category essentially, which is named Horizons. So I was watching this from the get go. Now it's finally launched and it's up
in Canada. So joining us on this episode of Trillions is Steve Hawkins, who is the man behind it, and we're gonna talk to him about what it was like to come up with this idea and bring it to market and what he hopes to have happened. Do you know him, Eric from from your days at inside et F? Oh yeah, would be happening right about now and the sunny climates. I know, you guys love when I dropped the word circuit. But I have seen him a lot
on the E t F circuit. I mean you'll bump into Sieve at the conferences, especially the ones in Canada, and I'm up in Toronto a lot um. So yeah, he's a great guy. He honestly was. Like I said, he was ahead of everybody with the marijuana et F and now that's well over a billion dollars that whole category, so um, and they have a lot of other e t s by the way, but that's the one that is most like this, this new when they have this
time on Trilliance Psychedelics. Steve, Welcome to Trilliance, Joel, Eric, thank you very much for having me today. So Eric and I were wondering, UM, as we were inviting you on, how can we get some samples or do you can we get some in kind? Do you do in kind redemptions with the underlying well, you know, as Americans, there's not a lot of ways for you to buy Canadian e t F yet there's you know, there's only a
couple of little different brokerages. UM, and this e t F has listed on the neo stock has changed here. If you find a US brokerage to buy the units of the e t F, you can redeem the main kind directly with Horizons ETF and we will somehow deliver you some samples cross border. Wow. That's and I can tell you've actually been asked this question before. It was honestly, when we launched h MMJ in two thousand and seventeen, it was the very first question that we we got asked.
I went on Bloomberg TV and and Amberg Candlar is like, I don't like the ticker, but can I redeem in kind for some samples please? I mean, you know, we joke and it is funny because I was just talking to Joel. I'm like, it's not only mushrooms. There's ketamine in there. There's basically a lot of the stuff that we took in the nineties at parties is now like medicine. And I feel like we were actually medical pioneers. We were way ahead on curing depression. And you know, what
do you think about that? Isn't that kind of crazy? That's why it's funny is because this used to be the stuff that you weren't supposed to do, and you did it parties. Well, the sixties and seventies are back, is the way that I'm looking at it. And people are going to start wearing the tied eye shirts again. I put I wore a pretty fancy shirt at the market open the other day. Um. But you know it is absolutely it's not just psilocybin. It's not just magic mushrooms.
Ketamine is a very important ingredient out there. There's a company that's also creating a synthetic psilocybin. So I mean one of the Uh. One of the knocks that we got when we launched h MMJ is we had in an investing company in there that was creating UM synthetic CBD and people didn't like that. It's like this is
anti marijuana. But you know, this is all really a part about the drug industry and therapeutics for you know, the over seven hundred million people in the world that are suffering from mental illness and eating disorders and depression, uh and addiction and uh. You know this is these are being tested drugs. This is not a recreational thing, even though that's where sort of a lot of the
marijuanas industry is very focused. UM. The psychedelics industry is really focused on science and going through the rigorous f d A and Health Canada drug testing protocols to bring real therapeutic drugs to marketplace. And I mean that that
is a really interesting thing to talk about. And if you followed UM journalists like Michael Pollen, who has been writing about a lot in this space for actually for years now, UM, you know, it does feel like it could be the sort of the tip of the spear for how we treat a lot of things like PTSD UM depression. So how big of an opportunity do you think this could be, Steve, I mean, right now, it's
we just really don't know. I mean, there's a there's over according to the World Health Organizations, there's over seven night er million people that are suffering some from some form of mental illness. In this regard, you know, depression and clinical depression really haven't seen any advancements in treatment in decades UM, and it's really only as a result of some of the things that Eric mentioned earlier, like state laws changing, um, new exemptions coming in for companies
in Canada. You know, we've we've created new rules around health Canada. I mean, we were the first, you know, G seven company to country to legalize marijuana. But the drug market itself, for the illicit drug market, is starting to the government is really starting to look at things a little bit differently and allow companies to do more
and more testing in this regard to open it up. UM. But you know, with J and J as as an example, is a company that's in here because they came to market with Academie drug, which was developed from a molecule from a Canadian psychedelics company, which then sold it to a company which then J and J bought and now they have a nasal based spray depression drug which is
hit the marketplace. Uh. And you know, a VA, another very large drug company, is also working on on a ketamin um anti depression drug as well, which is still in testing. But there's so many different new psychedelic opportunities and therapies that are going there. But like some of the companies are working strictly on the delivery mechanism of those therapeutics as well. So it's not it's you know, how can we do micro dosing of LSD more efficiently?
You know, I mean I've never micro dosd LSD yet, but you know, I think it's something that I might have to think about if I was a depressed person. I'm not really, but uh, you know, I have other potential addictions that I might have to treat with my micro LSD. So we'll go from there. Well, I'm sure you can cope with some new et f ideas. If you start doing that, I'm sure we'll get even more
creative over there. Um. But in serious, all seriousness, I think one thing I thought I thought about cannabis and shrooms and all and all this stuff becoming a little more accepted in mainstream is the fact that there was an opioid crisis and people are looking for some other way to treat a lot of things that aren't that is that did that open the gateway to this or do you think this all of this stuff would have
would have happened regardless. I mean, I think that was a big genesis to the sort of cannabis revolution that we started to see in in late and becoming significantly more stream, more mainstream. I think you're absolutely right from a medical therapeutics perspective, because cannabis, like CBD especialty, is significantly safer um than fent and all and other opioids
which can significantly which are very very addictive. Um. You know, the thing with micro dosing and psilocybin and ketamine is it's still in the early stages of sort of approvals and testing and things like that, and we and they've been they've been highly addictive in the past, but it's really the micro dozing um and that is sort of
moving away from the addictive opioids that we're saying. And so I would h P agree that it was a genesis of of an entire movement in pharmaceutical therapeutics UM to move away from opioids, and doctors are so much more inclined to prescribe UM non addictive therapies to treat like clinical depression and things like that. And that's where I think back to Joel's point, there is a huge
opportunity from a global perspective for this industry. I mean, the one thing that we really have to think about from behind the scenes though, is still is there's still a stigma to magic mushrooms and to psychedelics and um. You know, cannabis is much more mainstream from a everyday recreational use. This is really you know, psychedelics is not doesn't really have a recreational opportunity except in a very
very small portion of the marketplace. I'm actually curious about that the stigma that you mentioned though, because as we saw with cannabis, really it just takes time and suddenly that that perception can change. I mean, do you think that's true of this opportunity in in the psychedelic space or is the is the stigma completely different than than cannabis. No, I mean, because this is going to be like doctor
prescribed medicines for you. I think that stigma is going to go away very very quickly as soon as we see real results happening with people. And we've already seen that in a lot of their drug testing already. I mean there's probably twenty five to thirty drugs specifically in drug testing right now in in phase two Phase two A, phase two B testing. That there's some in phase three testing UM. And I really think that as there are more drugs approved, there are more doctors that are prescribing
these medicines. Just like you see with CBD CBD oil CB treatment, CBD UM ointments on your knees. Uh, We're going to see a significant ramp up in the use of psychedelic based therapies. So the actually really interesting thing there to have that many drugs and development and frankly only a handful that are already sort of out there and available. I mean that kind of presents a challenge for you to bring an e t F to market.
And I'm curious when you look through your holdings. You know your top ten there, you mentioned a couple of them already, but how are you navigating that challenge? And then what of those top holdings do you find to
be really really interesting. Well, I mean we put a couple of big farming in there that are that are you know, touching this space, that are not necessarily that active, and we had to do that to sort of round out the portfolio and get enough diversity in in the explosure of the portfolio, I mean similar and only launched d MMJ. We had Scott's Miracle grew in there, which people are why did you putcot Smoker. Well, it's very very active in the in the cannabis space, cannabis growing
opportunities here. We as I mentioned, we have J and J and Abbey. Um. You know, but some of the bigger companies that have out there recently my Men, which did a very very large I p O which is a New York based company, but it's obviously it's listed on a Canadian stock exchange because no u S stock exchange will list potentially illegally operating company at this point
in time. UM. But Cybin, which is one of my near and dear favorites, which is one of the largest companies in there as well from a way perspective, has so many drug therapies UM in process. But not only that is, they're very very focused on the whole delivery mechanism and you know, micro dosing through a mental health professional in the past it's taken like three to four hours.
Like that just doesn't you can't sustain a significant amount of population and therapeutic addresses with that long of a treatment. You know, there's got to be a better way to do this. Micro LSD implementation and the therapeutic applications of the mechanisms and the devices is going to be very very important to this industry as well. But I mean those are sort of like the compass um Compass Pathways, which is a UK based firm listed in the US.
UM is also very big in this space as well, and they're the ones that are sort of creating the the synthetic psilocybin um and they have some derivatives that they're making out of that, which has been very very positive as well from a from a physical test perspective. Um to your point about you know, how could we create an et F, it was really the changes in the capital markets in with UM, some of the state rules changing, some of the company's being coming more active.
You know, it's still I'm gonna say you know, a microcap small cap portfolio on an overall basis, but it's very, very focused on the psychedelics industry itself. Uh. And it's just you know, we have more names in the portfolio now though than we launched when we launched the first marijuana e t F because we only had fifteen names in the portfolio. We launched with seventeen names in the portfolio this week. Yeah, I actually wrote about it in
a note and two things struck me. One was just the seriousness of all of the medical research, the grants. You know, you go on Johns Hopkins has a whole team dedicated to this, and it quickly realized this is serious business, um, even though we joked earlier. And then the other thing is how small the companies were. And you address this a little bit, but for let's use
et F nerd out a little bit here. If you're designing the CTF and you obviously want to capture this as best you can, but then you see like Johnson and Johnson in there. Obviously, I'm sure psychedelics are a tiny fraction of their overall revenue. Do you plan to sort of um work out those bigger names as the smaller eyes get bigger and go turn into small and mid caps. How does that process work when you're trying to capture this as purely as possible. I mean, that's
that's a great question, Eric. And and you know, if you look at the evolution and the maturity of the cannabis market, right from the very start to the end. I mean, our our underlying index to h MMJ has changed seven times since we launched in seen as that market has evolved, as market caps have significantly grown. Um, you know, we've actually had to reduce them the portfolio, we've reduced the sort of non marijuana focus names. Um.
And that's exactly what's here. I mean with Big Farmer, we actually there's a cap in the fund for individual and overall exposure, but that actually will go down over time as the rest of the industry sort of UH grows and matures. As you said, and you know, there's a lot of sort of we had to build this
index so that it would actually change. And sure with the industry itself and the UH, the underlying stock price will increase, the average daily trading volume will increase, the market cap threshold to get into the index, all of those things will increase UM as the industry itself matures, and that's that was very very important to us as building UM in building this index for the fund. I'm actually curious just on that idea of of you know, this the evolution if you will, of the e t
F and the holdings and the waitings. What did you learn from having the cannabis cannabis et F before that helped you navigate the launch of this one. Dealing with third party service providers which was one of the biggest pains in my butt when launching HMMJ and like getting your auditors, your custodian, the stock exchange, UM, it wasn't
the regulator. The stock regulators are fund regulators. What was right to the easiest part um And here going into the psychedelic space, there was for a lot of the third parties. Again, there was a lot of i'll call
it reputational risk. So I had to go to a different stock exchange that allows psychedelic companies to be listed on it UM, and I had to go through a significant amount of uh sort of approval processes with our third party service providers like you know we B and y Melon as our custodian and they are the largest global custodian out there, and UM, you know, it was a process to to get the approvals for that, and UM you know that was getting all of those approvals
in advance was very very important for the timing of we wanted to get launch, because when we tried to launch h M M J, I mean it took us four months to get those approvals. Here, I got all those approvals at a time. But going back to Eric's point about the sort of the evolution of the underlying industry, I would say that is the single biggest lesson we learned was how to build an index that changes over time as an industry with years. So we're in here
early for sure, and we know that. But one of the great things about an et F is it supports the underlying industry itself. There's almost like a self fulfilling UM promise here to to do well because you're supporting this psychedelic industry itself. And we're very very happy to be in this industry where it can be so beneficial to the UH, to the public itself at the end of the day. And you know, another kind of E T F NERD question. But I think important as an investor.
One of the things about HMMJ that was fascinating is you guys broke the record for positive tracking error or tracking difference. In other words, if you look at the first year and a half of this fund, it was up, but the index is only up normally an e t F, you're lucky if it tracks perfectly. This was giving you twenty six percentage points have doubled it. It was almost
like you're an active manager. And obviously this is because you were lending out shares of the stocks because people wanted to short them, and they'll pay you a fee for it, and you're able to put that back into the fund. Um. It has gone down a little bit. I guess the interest to short has subsided a bit
on cannabis. But do you see that as being something that would also help with the new ETF in terms of having some of these smaller, harder to get stocks and then being able to use some of that money to to use performance a little Absolutely that is going to happen here as well. You know, I mean Robin Hood really changed the lending market last year, and you know, after three very very strong years of lending in the
cannabis space, UM lending rates. As soon as robin Hood went on line and started lending, lending rates in the cannabis sector went down almost from where they were or from a hundred UM. And in this day, in this space, it's still very very early. There's still a lot of founder stock, there's still a lot of restricted stock, the floats are much smaller in these companies, and there's a significant lending opportunity. So again we're gonna do We're gonna
be dealing with UM. The average lending rate in our portfolio is uh probably minus thirty or three thousand basis points minus thirty we call it in the in the lending terms UM from an annualized lending rate, so that that could you know, we're allowed to lend up to fifty percent of the portfolio at this point in time. In theory, we're going to be paying you to own psychedelic stocks between ten and fift on an annualized basis
without any stock movement at all. That is an amazing This is Joel, I mean, we talked about you know this whole Wall Street bets wants to like stick it to the hedge funds. This is a this is a very safe and legal way to do that, because hedge funds are the one who liked to short stock. So a lot of ETFs, not just horizons. We talk with vanguards. Jerry O'Riley, he does it with the biggest fund in the world. Where you get money from hedge funds to subsidize the the e t F. In Jerry's case, it's
a few BIPs. In this case it's it can be a lot. I find that fascinating that the small investor is getting paid by the hedge funds through the e t F lending process. I don't know. I just that's a people don't talk about it much, but in this space it can be very dramatic and really give you extra return. Okay, So I I hate to bring just a little bit of anxiety to the party, but it seems fitting since you know, we're talking about psychedelics and there's always going to be like a little bit of
weirdness um associated with trips. But Steve Um, you know, there are considerable challenges that you're going to face yet, and some of those are gonna be probably regulatory and adoption and results of of the clinical trials and everything else that we've talked about, UM, how are you thinking about what that downside and what those risks might look like for this opportunity, because it does seem like, you know, it's early and things could change dramatically. How are you
assessing that? I mean, those are those are all very good points, Joel. I mean the big thing here is this, we believe that this is a very early stage opportunity, much like cannabis was in seen and we've seen some significant highs and significant lows to that industry as it has matured UM, and I don't doubt that we're going to see that here. The one nice thing is all of these companies have been able to raise significance amount
of capital of late, very very easily. They've been going out to marketplace UM and not like Amazon or not Amazon AMC who recently did that interesting stock offer. But uh, you know, this is an early stage industry. For sure, they need a lot of capital. UM. We're going to be there to help support that through the e t F. But the companies themselves have been able to very access the Canadian capital markets and even the the US hedge
funds and family offices and things like that. I mean, you've got big names like Kevin O'Leary and Bruce Litton that are throwing millions of dollars in its industry supporting some of the companies. They're on the boards or advisors to these companies. Um. You know, these are guys that are very, very active out there as personal investors. And when I when I see that, um, it makes me stand up and say, hey, hey, you know, there might
actually might be something do this. And to Eric's point, like I had no idea the followers of the psychedelic stock industry until we filed that prospectus and I got a thousand emails and it was unbelievable from all of these followers. I mean, um, it's been. It's extremely active in Reddit and and all of these other stock forms. Um,
and it's been fantastic to watch. And the hype that we've seen, like the number of hits on our website has gone up simply because of psychedelics and uh h m n J has always been the most active et f on our website by a long shot. That in our leveraged in an inverse leverage oyle this past year. But but outside of marijuana, like, psychedelics has been been a windfall. Just from a press and activity and hype perspective, It's been great to watch Canada. I feel like you
guys have very liberal regulators. Um. You know, Joel, we did the whole documentary on the first TTF and they designed it here in the US, but Canada was able to sort of, I don't know, take the idea so to speak, and get it listed there earlier. And if you think about it, like the Spack episode that we did the stack Guy was earlier. Julian, Yeah, so I do feel like in many ways, Um, you know, we're
just following your lead. Uh, Steve, what is it about Canada and your capital markets that allows you to be so adventurous and innovative. I have to say, our regulators you're just smarter than the SEC. You know. It's it's probably just as simple as that. I mean, we we brought active ets to the marketplace over ten non transparent active ets over ten years ago. You know, it's just it's just we we can evolve the underlyings of the et F industry a lot faster. Unfortunately, our markets are
you know, significantly smaller from an investment capital perspective overall. Um, But you know, I mean, I take a little bit of offense to Eric's point that we copied the U S filing on marijuana, because you know, they filed their perspectives on Thursday and my perspectives got received by the regulators on the Friday, and then I was able to launch within two months, and they took eight months to launch from there. But you know, time out, guys. Let
me clarify something here. I was talking about the originally t F s p y. Okay, so are not you no, no, no, I'm not. Yeah. That's a case where I even got what's his name, Peter Haynes, one of the founding fathers up there, and he said, yeah, okay, the idea was hatched in the US, but we launched it here sooner,
you know, what can I tell you? So he admitted it, even though every time you go to a Toronto E t F conference they do this touchdown dance about having the first et F and I'm like, well, Eric, come on, it was Toronto, but the idea was here and we just have an sec It took four years. Steve, I gotta ask you the closing question that we we love to ask many people on trillions, which is what is your favorite E t F ticker that is not your own? I like MJ in the U S. It's very very simple,
it's very very straightforward. They were a nice follower to our E t F. Wait wait, wait, hold on, hold on. How could you not pick toke if you're going to be in that category here? I mean, that's a plus. It's a verb verb tickers are the best toke. I don't know. I think that one's Mount Rushmore, but maybe maybe I'm I'm just biased. Well, there will there will soon be stocks that have the ticker like trum or
you know, something along those lines. I mean, we went psych, but there was already a stock that was p s y c um, so we went p s y K with with our new we we thought. So there was one that just launched here called Dude. I thought that might have been a decent one. And also Ben Johnson at morning Star head t RPN tripping. But then again, I guess that deviates that. This is not recreational. This is serious depression curing. Not a party I went to in the nineties. I don't know what else they were
serving out. Those parties you went to in the nineties are but so anything goes pre cell phone, San Francisco, I think too right areas economy. It was a beautiful no cameras, Yeah, all right, Steve Hawkins, thanks so much for joining us on Trillions, Joel, Eric, thank you so much for having me today. I had a great time and hope we have a lot of fun with Magic my shins going forward. Thanks for listening to Trillions until
next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify, and wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show, He's at Eric fall Tunas, and you can find more about Steve Hawkins and Horizons at Horizons et f s dot com. This episode of Trillions was produced by Magnus Hendrickson. Francesca Levy is the head of Bloomberg Podcast by