Franklin Templeton plans to launch two ETFs Thursday that use stock dividends to buy bitcoin instead of more shares.
Key Takeaways:
- Both indices began with a 5% bitcoin weight, and quarterly trims keep the crypto a secondary holding.
- FIBT’s index skews heavily toward technology, which made up 58.72% of its weight as of October 26.
- Neither ETF must hold bitcoin directly, since each can use bitcoin ETPs, futures, and options instead.
The Franklin US Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin US Innovation Bitcoin DRIP Index ETF (FIBT) will each track a VettaFi index, according to a filing with the Securities and Exchange Commission. Both indices began with 95% in U.S. stocks and 5% in bitcoin.
Dividend reinvestment plans, or DRIPs, have long let investors automatically turn each payout into more shares. These funds keep the automatic part but change where the money goes.
Every regular and special dividend from the stocks in each index gets reinvested into bitcoin, according to the filing. The purchase happens at the market open the day after a stock’s ex-dividend date. As a result, the bitcoin stake can grow over time from company payouts rather than new cash.
See more: Novel ETFs: New Milestones for Crypto, Leverage & Sports
To keep bitcoin a secondary holding, VettaFi’s index methodology caps its weight. Each quarter, any bitcoin stake above 5% gets trimmed to 4.5%, with the extra money spread across the stocks.
A sharp rally can trigger a faster reset, though. If bitcoin tops 20% at any close between quarterly reviews, the index trims it to 4.5% two trading days later, according to the methodology.
How the Two Bitcoin Indices Differ
FBEQ tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index. Its stock side covers the 500 largest U.S. companies by market value, the filing said.
As of October 26, the index had 497 constituents, with technology at 35.58% of its weight, according to VettaFi data. Apple Inc. (AAPL) and Nvidia Corp. (NVDA) led at 7.11% and 7.1%, respectively.
FIBT follows the VettaFi US Innovation 100 Bitcoin DRIP Index. That index pulls from the 100 largest U.S. companies on the Nasdaq, excluding financial firms, according to the filing.
That approach leans harder into tech. Technology made up 58.72% of the index as of October 26, while media and communications came in at 12.89%, according to VettaFi. Apple and Nvidia again led at 9.91% and 9.9%, respectively.
Neither fund has to hold bitcoin directly. Instead, they can use bitcoin exchange-traded products, futures, and options, including funds sponsored by Franklin Templeton affiliates, the filing said.
Bitcoin sat below the 5% trim point in both indices as of October 26. It ranked as the fifth-largest holding in the large-cap index at 3.95%, ahead of Amazon.com Inc. (AMZN), VettaFi’s index data showed. In comparison, bitcoin came in 10th at 3.24% in the innovation index.
For more news, information, and analysis, visit the Equity ETF Content Hub.
VettaFi LLC (“VettaFi”) is the index provider for FBEQ and FIBT, for which it receives an index licensing fee. However, FBEQ and FIBT are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of FBEQ and FIBT.
Originally posted on ETF Trends
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