How Diaman Partners Launched Europe’s First Crypto UCITS Fund with 21Shares

Diaman Partners stands as a testament to innovation—over the past two decades, the company has undergone remarkable changes in the realms of technology and finance. CEO and Co-founder Daniele Bernardi captures the journey, “Diaman Partners was born in 2002, as a financial advisory company. Eventually, we launched a digital platform exploring tokenization, and three-and-a-half years ago we started a crypto-hedge fund, which has a good track record.” The firm has seen every aspect of the market and swiftly adapted to the ever-changing landscape.

Daniele, an early crypto adopter, recalls, “I was interested in crypto because I was attracted to the technology,” but over time he realized cryptoassets had even greater potential than simply presenting interesting tech, “I’m not a maximalist but I believe in the necessity for digital instruments and the digital economy.” This realization has driven his mission to expand access to crypto exposure in the European market.

Now, Diaman Partners has launched Europe’s first digital asset focused UCITS fund (Undertakings for the Collective Investment in Transferable Securities).

Enabling Crypto Exposure to the European Markets

In July of 2022, Diaman Partners made an exciting announcement: Azimut Investments, a global private banking firm founded in 1989 by Pietro Giuliani, acquired 20% of their company. Azimut has established itself as a prominent player in the asset management industry, not only in Italy but on the international stage. Daniele recognized the immense potential of this partnership to make crypto access more accessible in the European market. However, there was one challenge. As Daniele points out, “We knew it would be difficult for a financial advisor to promote a hedge fund or alternative fund in Europe.” His team needed to create a fund to serve the needs of both regulators and clients alike.

Finding Regulatory Pathways for Partnership Growth

Azimut and Diaman Partners needed to find a regulated way to work together to take full advantage of their new partnership. In July 2022, they initiated a Reserved Alternative Investment Fund (RAIF). That move opened up new possibilities as Daniele recalls, “Azimut asked us to manage our cryptoassets through an ETP structure. After creating the fund, I realized we also had the power to create a retail fund to purchase transferable securities.” From there, Diaman Partners set out to establish Europe’s first crypto-specialized UCITS fund.

Navigating Regulatory Challenges and UCITS Compliance

Daniele’s team dug into the possibilities, “We conducted a lot of research and invested a lot of time and resources into understanding the regulatory frameworks before deciding to open the first UCITS fund in Europe to expose the investor to digital assets through ETPs.”

Working with trusted partners capable of supporting the regulatory requirements was crucial, particularly as ETP assets are not very common in Europe. Daniele had previously collaborated with Massimo Siano, Managing Director and Head of Southern Europe at 21Shares, and knew the team had the operational knowledge and experience he was looking for, “Even regulators don’t hold a strong knowledge of ETPs. When you’re starting with ETPs, you need to study the counterparty risk and how 21Shares manages custody. 21Shares is very clear and transparent in describing everything,” Daniele explains, “There were a lot of open questions to solve. 21Shares and Massimo helped to clarify so many pieces of the process.”

As Daniele developed the UCITS fund, he learned that not all ETPs are UCITS eligible. According to Daniele, “To be eligible for UCITS legislation in Europe, transferable securities must meet several characteristics, including deep liquidity, no leverage, and the asset has to be physically backed by the underlying it represents.”

21Shares has strong, established partnerships with industry-leading market makers to maintain deep liquidity and ensure timely execution. Physically backed 100% by the corresponding assets, the 21Shares ETPs hold several qualities that make them eligible for UCITS funds. Daniele agrees, “The liquidity and being 100% physically backed is fundamental for our investment.”

After extensive work and dedication, Diaman Partners launched their UCITS fund in July 2023.

Looking Ahead

Daniele is excited to focus on his collaboration with Azimut Group in the upcoming year. The new opportunity for a broader reach allows Daniele to realize his mission of providing crypto exposure to more investors in the European market. He’s already planning his next innovation, stating, “I want to leverage the relationship with Azimut to create a platform for UCITS funds in digital assets.” Looking ahead, he envisions substantial benefits for future clients, “there are huge opportunities for the investor, in staking, yield farming, and many other things. With Azimut, our goal is to leverage Diaman to execute digital asset investing with some of the best companies in the world.” Daniele smiles, “And of course, we would love to collaborate more with 21Shares.”