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Two funds listed on the Nasdaq exchange direct dividends from major U.S. corporations into a bitcoin component that expands with each payment.
Franklin Templeton has officially introduced two exchange-traded funds designed to convert stock dividends into bitcoin. The Franklin U.S. Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin U.S. Innovation Bitcoin DRIP Index ETF (FIBT) are set to begin trading on the Nasdaq.
This launch marks the final regulatory milestone following Franklin’s submission of registration documents to the Securities and Exchange Commission on October 22. Although the filings for both funds were submitted in June without specified tickers or fee structures, the details were finalized four months later.
How the funds work
FBEQ tracks the VettaFi U.S. Large-Cap 500 Bitcoin DRIP Index. This index comprises the 500 largest U.S. companies by market capitalization, weighted according to float-adjusted market cap. As of September 30, the index contained 499 stocks with market values ranging from $10.2 billion to $5.5 trillion, showing the highest concentration in the information technology sector.
At inception, the index allocates 95% to equities and 5% to BTC. Any dividends paid by the constituent companies, whether regular or special, are reinvested into BTC at market open on the day following the ex-date, causing the bitcoin portion of the portfolio to increase with every payment.
A conventional dividend reinvestment plan (DRIP) utilizes cash dividends to purchase additional shares of the paying company. Franklin’s approach channels that cash into BTC instead. For investors, the dividend income from America’s largest corporations transforms into a recurring bitcoin purchase, eliminating the need for a separate exchange account, wallet, or custody management.
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The bitcoin exposure is capped. During each quarterly rebalance, any allocation exceeding 5% is reduced to 4.5%. If BTC surpasses 20% of the index between rebalancing periods, the index reduces it to 4.5% within two business days, with the proceeds reallocated to stocks.
The outcome is a traditional stock fund equipped with a bitcoin sleeve, distinguishing it from a pure bitcoin fund.
The fund does not hold BTC on-chain. Instead, it gains exposure through bitcoin exchange-traded products, such as Franklin’s own spot fund, bitcoin futures and options, or depositary receipts, sometimes via a subsidiary based in the Cayman Islands.
FBEQ has an expense ratio of 0.09% and does not charge a 12b-1 fee. Franklin Advisory Services manages the fund, while Franklin Templeton Institutional serves as the sub-advisor.
Bitcoin as a mature, investable asset
"Bitcoin has matured as an investable asset, supported by deeper market infrastructure, broader adoption and a growing understanding of the role it can play in portfolios," said Dina Ting, SVP and Head of Index Investments at Franklin Templeton. "A systematic approach to building exposure is one way to address this next stage of adoption."
Jeff Masom, Head of U.S. Distribution and Global Wealth Management Private Markets, described the funds as an innovative method to merge U.S. equities and bitcoin using a distinct index methodology.
