Two new index funds will take every dividend their companies pay and use it to buy bitcoin. The prospectus also reminds investors that the fund must, by law, pay out substantially all of its income.
Dividend reinvestment plans usually put the money back into the stock that paid it. Franklin has kept the plumbing and changed the destination. Each fund starts at 95% US equities and 5% bitcoin, and “all regular and special dividends are reinvested into bitcoin at the market open on the day following the dividend ex-date”.
The equity side is unremarkable in the best way. FBEQ tracks a VettaFi index of the 500 largest US companies for 0.09%. FIBT tracks the 100 largest non-financial companies on Nasdaq for 0.19%. Neither fund holds bitcoin directly. The exposure comes through bitcoin ETPs, including Franklin’s own, plus futures, options and possibly a Cayman Islands subsidiary.
The rebalancing rules are where it gets interesting. At each quarterly rebalance, if bitcoin has grown above 5%, it is cut back to 4.5%. If it ever passes 20% between rebalances, it is reset to 4.5% within two business days. So the dividends patiently build a bitcoin pile, and every quarter the index sells it back to slightly below where it started. It is less a bitcoin accumulation strategy than a bitcoin metabolism.
Then there is the tax section. As a regulated investment company, the fund “must generally make distributions of substantially all its net income”. Since that income has already been spent on bitcoin, Franklin warns that the fund “may need to limit its dividend reinvestments” or “may be required to liquidate other investments in its portfolio that it otherwise would have continued to hold”. The dividends go into bitcoin, and the dividend comes out of something else.
The innovation version deserves a moment of admiration. Its index, the VettaFi US Innovation 100, takes the 100 largest companies listed on Nasdaq by market value and leaves out financials. That is, give or take the index provider, the recipe for the Nasdaq-100: a portfolio concentrated in technology, with a 20% cap on any single stock, built from companies that generally prefer buybacks and reinvestment to paying dividends. It charges more than twice as much as FBEQ to run the dividend trick on the part of the market with the fewest dividends to convert.
The fund owns 30 to 50 hand-picked US “Bulldogs”, described as companies with pricing power, durable competitive advantages and managements focused on “taking and defending market share”. It then protects them with options on a completely different portfolio: the S&P 500, via SPY.
The collar is a quarterly trade. The fund writes a call at about 105%, buys a put at about 95% and writes another put at about 80%, all sized one-to-one with its assets. The prospectus is admirably clear that this “provides no protection against the initial approximately 5% decline”, then cushions roughly the next 15%, then stops.
The overlay, it explains, “is designed to mitigate systematic equity market risk”. That is a polite way of saying that if the Bulldogs fall while the S&P 500 does not, the hedge will watch with interest. I recently noted Fidelity’s dynamic buffer, which adjusts gradually as markets move. This one resets every quarter and buffers the index rather than the fund. All of this for 0.75%.
The ticker is excellent, and someone in the US got there first with a generative AI fund of the same name. The more interesting question is who decides what counts as artificial intelligence. For this fund, the answer is the Consumer Technology Association, the trade body best known for running CES.
The index takes companies that the association classifies as AI “Enablers” (semiconductors, autonomous systems, machine learning databases) or “Engagers” (those that “design, create, integrate or deliver AI”). Each is ranked by an “AI Intensity Rating”. The top 20 in each group go in, enablers get 60% of the weight, engagers get 40%, and no stock can exceed 4%.
The clause worth reading twice is the monthly “extraordinary addition”. A newly listed company can join the index outside the normal schedule if it has a market value of at least US$250 billion and an AI Intensity Rating of 100%. I recently wrote about an AI bond fund whose list of eligible borrowers includes OpenAI and Anthropic. Betashares appears to have written the equity version of that hope into its index rules, ready for a flotation that has not happened. The fee is 0.57%.
None of these three funds has AI in its name, and Amundi’s launch material describes all three as exposure to “the physical enablers of artificial intelligence”. Satellites, power grids and rare earth miners have each been an investment theme in their own right for some years. They are now also AI.
To be fair, the logic holds. Data centres need electricity, chips need metals and somebody has to put the connectivity in orbit. Each fund tracks a Solactive index and uses full physical replication. Space and critical metals cost 0.50%, electrification 0.45%. Amundi’s head of ETFs describes the approach as access to “specific, high-conviction themes”. The conviction is clear. The specificity is shared between three funds.
This fund tracks the MSCI World index through a swap for 0.12%. It does not reinvest its dividends into anything exotic, it holds no opinion about which companies are Bulldogs, and nobody has rated its AI intensity.
It will, however, own most of the companies in every other fund in this piece, in sensible proportions, for a fraction of the price. The products that need the most explaining tend to get the most attention, while the ones that need none quietly end up in the portfolio that is still there in twenty years.