"Asset that has a resale value.”11 Dec 2017 15:34
“The big players are looking at diamonds in a different way,” said Ehud Laniado, chief executive of Cora International, which sold the 12.03-carat Blue Moon diamond for $48.4 million at a Sotheby’s Geneva sale in November, a world record for any jewel sold at auction at the time.
“They are not looking at them just as a jewel, but as an asset that has a resale value.”
Citigroup said the outlook for gold remained uncertain partly due to concerns about a possible increase in U.S. interest rates. In such a scenario, investors may look at a next-best alternative such as diamonds.
However, the diamond investors’ club is shut to most ordinary savers due to its complicated, insider nature - characterized by poor liquidity, a lack of price transparency and high fees. While some are making efforts to create a liquid market, the process has been slow.
Entry level for Sciens Coloured Diamond Fund II, one of the more established closed-end funds now shut to new investors, is $1 million. It invests in diamonds in rare colors such as red.
The fund, which manages around $50 million, uses trading and buy-and-hold strategies for long-term appreciation.
“Color diamonds are considered a safe haven,” he said. “Color diamonds are a hedge against inflation, currency risk, market fluctuations and political uncertainty.”
Solitaire Diamond Co, another diamond-backed fund now closed to new investors, is backed by an assortment of white diamonds of high-grade clarity and cut weighing under 5 carats, which are certified by international laboratories such as the Gemological Institute of America.
Fred Sinclair-Brown, Solitaire fund manager, said it made a gross margin of 20 percent over the past 12 months, above expectations of 14 to 16 percent. He said he was planning another diamond fund for professional investors, this time possibly backed by colored gems.
Despite a handful of diamond-backed initiatives, fund managers have struggled over the years to find the right investment vehicles for diamonds due to illiquidity, a lack of price transparency and high transaction fees.
“I am very dubious about diamond-backed investment because the price of diamonds is not listed anywhere and the market is too illiquid,” said Edmund Shing, strategist at BNP Paribas and former global equity fund manager of BCS Asset Management.
Fund managers pointed to very separate markets for white diamonds. While white diamonds can be correlated to the commercial market for bridal jewelry, color gems are in a unique investment category. Part of the problem with diamond investing is that different categories make it difficult to compile generic prices.
A recent Citigroup poll found that about one-third of the respondents were willing to invest in a diamond product having homogeneity and liquidity.
Martin Rapaport, head of the Rapaport Group, which has its own polished diamond price list widely u
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