Key facts
- Franklin Templeton has filed with the SEC to launch two new exchange-traded funds.
- The proposed ETFs, Franklin US Equity Bitcoin DRIP Index ETF and Franklin US Innovation Bitcoin DRIP Index ETF, would invest in US equities.
- Dividends from these equities would be automatically reinvested into Bitcoin-related assets.
- The funds would initially allocate 95% to equities and 5% to Bitcoin exposure.
- Bitcoin allocation is capped at 20% and portfolio weights are reset quarterly.
Franklin Templeton is seeking to integrate cryptocurrency exposure into traditional investment portfolios with the proposed launch of two new exchange-traded funds. These ETFs would invest in US equities and automatically reinvest any corporate dividends received into Bitcoin-linked assets, rather than back into the underlying stocks. This strategy aims to provide investors with a method for accumulating Bitcoin exposure over time through a rules-based mechanism, avoiding the need for a direct upfront allocation to digital assets.
The two proposed funds, the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF, would track specific VettaFi indexes. The Equity ETF would focus on the 500 largest US companies by market capitalization, while the Innovation ETF would target the 100 largest non-financial companies listed on the Nasdaq. Both funds plan to invest at least 80% of their net assets in securities comprising their respective indexes and in Bitcoin-related instruments.
At launch, the indexes are designed to have a 95% allocation to equities and a 5% allocation to Bitcoin. When underlying stocks pay dividends, these payouts would be directed into Bitcoin-related assets. The structure includes limits to prevent Bitcoin from dominating the portfolio, with a quarterly review to trim the allocation back to 4.5% if it drifts above 5%. An emergency cap would reduce the Bitcoin exposure to 4.5% if it rises above 20% between reviews.
This move by Franklin Templeton, which already operates the Franklin Bitcoin ETF (EZBC), suggests a strategy to capture a more specialized segment of the crypto ETF market. By wrapping Bitcoin exposure within a familiar dividend reinvestment plan (DRIP) framework, the firm aims to appeal to investors who are comfortable with equity ETFs but may be hesitant to invest directly in Bitcoin. The filings indicate a potential launch in early September, following a trend of issuers developing more complex crypto products beyond simple spot Bitcoin exposure.