Franklin Templeton files two PayDay ETFs that would pay every two weeks
The Oct. 14 filing says those checks may include a return of capital, a shareholder's own money coming back.
Key takeaways
Franklin Templeton ETF Trust filed on Oct. 14 to register two funds that would seek a distribution every two weeks, the Franklin PayDay Core Enhanced Equity Income ETF and the Franklin PayDay Innovation Enhanced Equity Income ETF. The names and the distribution policy are built around a paycheck. The same document says the distributions may include a return of capital, which hands a shareholder back some of the money invested.
The prospectuses are marked "Subject to completion, October 14, 2026." Neither fund has a ticker or an exchange.
The trust asked for the registration to take effect 75 days after filing, which would be Dec. 28. That date is when the paperwork can become effective. It is not a listing, and the shares may not be sold until it is.
How the two funds would work
Both would seek "current income while maintaining prospects for capital appreciation," and both would put at least 80% of net assets in equities. Neither would be an index fund.
The Core fund would generally buy companies in the Russell 1000 and the S&P 500, with a focus on S&P 500 companies, and sell call options on large-cap U.S. indices such as the S&P 500. The Innovation fund would generally buy companies in the Nasdaq Composite, with a focus on Nasdaq-100 companies, and its calls would reference indices such as the Nasdaq-100.
Franklin Advisers would be the investment manager. Its Franklin Templeton Investment Solutions team would pick and trade the stocks.
Putnam Investment Management and ClearBridge Investments would only supply model portfolios. Advisers would decide whether to use them. O'Shaughnessy Asset Management would run the options.
Under normal circumstances, O'Shaughnessy expects to sell calls with exposure at or below the value of the stocks, expiring in about five weeks or less. The prospectus says those calls will be uncovered, "meaning the Fund does not directly own the securities underlying the reference index."
The stocks and that index need not move together. The filing says the stocks can fall while the index rises, so the fund can lose on both at once.
In a flat, falling or modestly rising market, the prospectus says, the premiums could help the fund beat a similar portfolio that did not sell calls.
In a stronger rally, where the index rises above the option's exercise price by more than the premiums bring in, the prospectus says the fund "could significantly underperform a similar portfolio that did not engage in a call selling strategy." The income from the calls is paid for by giving away part of a rise.
Unlike Franklin's filing, Goldman Sachs describes the Goldman Sachs S&P 500 Premium Income ETF GPIX and the Goldman Sachs Nasdaq-100 Premium Income ETF GPIQ as covered-call funds. A May 27, 2026, brochure says their option coverage is generally between 25% and 75% of the portfolio. NEOS's prospectus for the NEOS S&P 500 High Income ETF SPYI says its index calls are covered because the fund owns the stocks in the index.
The stable check is an aim
Each fund is managed to seek, under normal circumstances, distributions every two weeks, at what the prospectus calls a "payday"-like frequency and a relatively stable level. That stability is an aim.
The same filing says there can be no assurance of that level, and that the amount of any distribution will vary. It sets no rate. Two checks a month is a schedule, not a promise of more income than a fund that pays once a month.
To hold the level, the filing says, the biweekly distributions may include a return of capital. A return of capital is typically not taxed when it is paid. It reduces the shareholder's cost basis, which can mean a larger taxable gain on a later sale, or a taxable gain even if the shares are sold for less than they cost.
Depending on the fund's earnings, the filing says, a distribution above the year's income may still be taxed when it arrives and not treated as a return of capital.
A 0.27% total fee, still in brackets
The two fee tables match, and both are unfinished. Management fees are printed as 0.27% inside brackets, other expenses as an estimated 0.00%, and distribution and service fees as none, for the same 0.27% in total annual operating expenses.
In a preliminary prospectus, brackets mean the number is not final. Other expenses are estimates for the current fiscal year.
If that total holds, it would sit 0.08 percentage points under the 0.35% total annual operating expenses of J.P. Morgan's JPMorgan Equity Premium Income ETF JEPI and JPMorgan Nasdaq Equity Premium Income ETF JEPQ, and of GPIX and GPIQ. It would sit 0.41 percentage points under the 0.68% total on SPYI and the NEOS Nasdaq-100 High Income ETF QQQI.
Franklin Templeton's Franklin ClearBridge Enhanced Income ETF YLDE already sells calls on large-cap indices. It charges 0.48%.
J.P. Morgan's two, Goldman Sachs's two, NEOS's two and YLDE pay monthly. JEPI held $45.85 billion and JEPQ held $44.08 billion as of Oct. 16. Against that field, the filing proposes a biweekly schedule and a lower total fee that is still in brackets.
ETFs in this story
Frequently asked questions
Can investors buy the Franklin PayDay ETFs yet?
Neither fund has a ticker or an exchange, and Dec. 28 would make the registration effective, not a listing.
Does paying every two weeks mean more income than a monthly fund?
Two checks a month is a schedule, not a promise of more income than a fund that pays once a month.
How is a return of capital treated?
A return of capital is typically not taxed when paid, but it reduces cost basis and can mean a larger taxable gain later.
How could these funds lag in a rising market?
In a stronger rally the fund could significantly underperform a similar portfolio that did not sell calls, because the income gives away part of the rise.
