Franklin Templeton launched two new exchange-traded funds (ETFs) on Nasdaq, designed to reinvest portfolio company dividends in bitcoin. The first day of trading for the two funds, the Franklin US Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin US Innovation Bitcoin DRIP Index ETF (FIBT), saw a combined trading volume of approximately $72,000, according to Unchained’s review of Nasdaq’s daily trading figures.
Details of FBEQ and FIBT ETFs
FBEQ traded 2,461 shares, corresponding to around $62,000 based on its closing price of $25.28. FIBT recorded a volume of 399 shares, equating to roughly $9,800 at a close of $24.52. Both ETFs structure their indexes to reinvest any cash dividends paid by underlying companies directly into bitcoin, increasing the funds’ bitcoin exposure between regular rebalancing periods.
The ETFs use indexes managed by VettaFi. FBEQ tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index, which selects large US companies. Meanwhile, FIBT follows the VettaFi US Innovation 100 Index, made up of 100 innovation-focused, Nasdaq-listed US companies, but excludes financial firms.
Each index started with an allocation of 95% in equities and 5% in bitcoin. Dividend distributions from the portfolio companies are automatically converted to bitcoin at the next market open following the ex-dividend date, gradually boosting the bitcoin allocation through the quarter.
Management, Structure, and Rebalancing
Both FBEQ and FIBT are managed by Dina Ting, Hailey Harris, Joe Diederich, and Basit Amin. These managers come from Franklin Advisory Services and Franklin Templeton Institutional, as detailed in the summary prospectuses filed with the US Securities and Exchange Commission on October 27.
Annual expenses for the funds differ: FBEQ carries a fee of 0.09%, while FIBT’s is 0.19%. Neither fund charges a 12b-1 distribution fee.
The bitcoin portion of both ETFs is subject to quarterly review. If the bitcoin weighting within the portfolio rises above 5% due to dividend accumulations or bitcoin price appreciation, it is trimmed back to 4.5%. If the proportion remains at 5% or less, the allocation is left unchanged. Any time the bitcoin share of the portfolio exceeds 20% before the end of a quarter, the allocation is reset to 4.5% after two business days.
Each index opened with 95% in stocks and 5% in bitcoin, and every regular or special dividend its companies pay is put into bitcoin at the next market open after the ex-dividend date, so dividends add to the bitcoin weight between rebalances.
Fund Launch and Future Monitoring
Franklin Templeton submitted its initial filings for these funds on June 18, and registered the ETFs for trading on Nasdaq via a Form 8-A on October 22. The final prospectuses were dated October 27.
The extent to which each fund’s bitcoin portion will increase over a quarter depends both on the size and timing of dividend payments and on bitcoin price fluctuations.
As new ETFs like FBEQ and FIBT integrate bitcoin allocations triggered by dividend payouts, investors may want streamlined access to real-time bitcoin pricing and up-to-date fund news. CryptoAppsy provides live price alerts and tailored coin news feeds, allowing users to closely monitor the potential impact of frequent bitcoin rebalancing on ETF holdings or their own crypto portfolios.
VettaFi will continue to update both ETF indexes quarterly and on an ad hoc basis if bitcoin’s allocation increases sharply ahead of schedule. The unique mechanism of reinvesting dividends in bitcoin distinguishes these ETFs from other equity funds.
Because dividends land in bitcoin between rebalances, how far each fund’s bitcoin weight climbs past 5% in a given quarter will depend on its companies’ payouts and on bitcoin’s price.
