Franklin Templeton's DRIP Funds Shake Up Crypto Investing with Low Fees

Franklin Templeton has introduced a new investment model called DRIP (Dividend Reinvestment Plan) that allows investors to accumulate Bitcoin using their equity dividends. The funds, which include the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF, allocate 95% of their assets to U.S. equities and 5% to Bitcoin.

The mechanics of the DRIP model involve using stock dividends to buy bitcoin-linked instruments such as spot Bitcoin ETPs, futures, or options. This creates a 5% allocation to Bitcoin from equity dividends, which is then rebalanced quarterly to maintain a maximum exposure of 20%. The funds use a wholly-owned subsidiary in the Cayman Islands for some transactions.

The DRIP model's expense ratio of 0.15% undercuts BlackRock's IBIT fund, which charges 0.25%, and other competitors such as VanEck's HODL fee and Grayscale's Bitcoin Mini Trust. While IBIT has attracted institutional investors with its massive liquidity and tight spreads, the DRIP model targets individual investors who want to build a Bitcoin position using their cash flows from large-cap equity holdings.