Jupiter Asset Management, the renowned London-based investment firm managing over $65.8 billion in assets, has recently withdrawn its investment in a Ripple XRP exchange-traded product (ETP) offered by 21Shares. This abrupt pivot was primarily driven by the stringent regulatory environment in Ireland, which has placed limitations on cryptocurrency exposure within UCITS funds.

Reversal of Fortune

Last year, Jupiter’s Gold & Silver Fund made a significant investment in the 21Shares Ripple XRP ETP, totaling $2,571,504. However, the regulatory landscape in Ireland, which governs UCITS (Undertakings for Collective Investment in Transferable Securities) funds, has enforced a ban on crypto exposure within these investment vehicles. As a result, Jupiter was compelled to offload the ETP holding at a slight loss, as reported by the Financial Times, with the sale amounting to $2,570,670—an $834 decrease from the initial investment.

Regulatory Restrictions

The UCITS framework, set forth by the European Commission, allows funds to allocate a small portion of their portfolio, up to 10%, to illiquid assets, colloquially termed the “trash ratio.” Nevertheless, European regulators have yet to reach a consensus on whether this includes ETPs backed by cryptocurrencies. Recent statements from regulatory bodies in Ireland and France have indicated a clear stance against the inclusion of crypto assets in UCITS funds.

A Divided Stance Across Europe

At the Future of Asset Management conference held in November, key figures such as Cian Murphy, the head of the international finance division at the Central Bank of Ireland, and Jessica Reyes, head of the asset management policy division at the Autorité des Marchés Financiers, expressed their reservations about integrating crypto assets into UCITS. While the UK and Germany have also placed restrictions on crypto investments for UCITS funds, Germany does allow exposure to crypto ETPs that mirror the underlying asset on a one-to-one basis.

Historical Context

It’s noteworthy that Jupiter’s Gold & Silver fund, managed by the adept trio of Ned Naylor-Leyland, Chris Mahoney, and Joe Lunn, is no stranger to cryptocurrency investment, having previously ventured into this space in 2017, well before the Irish financial regulator’s clarification on crypto holdings.