Franklin Templeton Files ETFs That Use Dividends to Buy Bitcoin Exposure

Dividend income from index funds has long been reinvested into additional equities. Franklin Templeton now aims to redirect those proceeds toward Bitcoin (BTC).

Two proposed ETFs, both set to list on Nasdaq, have been filed by the asset manager. Each fund begins with a 95% equity allocation and 5% Bitcoin exposure, though neither has started trading.

The relevance for Bitcoin lies in the mechanics of index funds. These funds hold diversified portfolios of large-company equities. Typically, cash dividends from those companies are recycled into additional stock purchases. Franklin Templeton's strategy channels that dividend cash into Bitcoin exposure instead, establishing a recurring demand source for the cryptocurrency.

How Dividend Cash Is Redirected Into Bitcoin

One proposed fund tracks the S&P 500's constituents. The other targets the 100 largest Nasdaq stocks, excluding financial-sector companies.

Both funds maintain an initial mix of 95% equities and 5% Bitcoin. After that, dividend payments begin to accumulate.

“All regular and special dividends are reinvested into Bitcoin at the market open on the day following the dividend ex-date, which increases Bitcoin exposure over time,” reads an excerpt in the prospectus.

Expense ratios are modest. The larger fund costs 0.09% annually, equivalent to $9 per $10,000 invested in the first year.

Launching soon…

ETFs that hold US stocks & reinvest any dividends into bitcoin.

Basically like investing in S&P 500 & Nasdaq 100 w/ dividends going to btc.

Targeting 5% btc allocation.

Think smart product design by Franklin Templeton.

Easy way for everyday investors to gain…

— Nate Geraci (@NateGeraci) October 25, 2026

Fund Automatically Trims Bitcoin Holdings After Rallies

A key feature: quarterly rebalancing trims any Bitcoin weight exceeding 5% down to 4.5%. Should Bitcoin exposure surpass 20% between these reviews, the allocation is reduced to 4.5% within two trading days.

Consequently, rising Bitcoin prices prompt sales. A downturn, conversely, allows dividend inflows to accumulate shares at reduced valuations.

Direct Bitcoin holdings are not planned. Instead, the funds will invest in Bitcoin-linked products such as Franklin-affiliated ETFs, futures, and options. The firm has noted it may forgo fees on its proprietary products, though that waiver remains revocable.

Franklin's regulatory filing describes Bitcoin as highly speculative and subject to significant volatility.

Broader discussion around cryptocurrency continues. Li Lu, founder of Himalaya Capital, last week labelled crypto as fundamentally bogus. BlackRock, the world's largest asset manager, advises a 1-2% Bitcoin allocation.

Franklin's strategy aligns more with BlackRock's viewpoint. The initial 5% Bitcoin exposure increases only to be trimmed back during rebalancing.

The true validation will occur once the funds commence trading on Nasdaq, where Franklin has already registered the shares.