like the Rapaport Diamond Report. (which lists wholesale prices), but diamonds
typically sell at some dis- count or premium below or above the list price and ...
DIAMWDS F r o m 1999 t o 2010, t h e a n n u a l i z e d real r e t u r n for w h i t e a n d c o l o r e d d i a m o n d s was 6.4 p e r c e n t a n d 2.9 p e r c e n t , r e s p e c t i v e l y , a c c o r d i n g t o a s t u d y released i n 2012 b y
finance
p r o f e s s o r s Luc R e n n e b o o g at T i l b u r g U n i v e r s i t y i n t h e
N e t h e r l a n d s a n d C h r i s t o p h e Spaenjers at H E C Paris. Compare that to global stocks and
p r i c e s for d i a m o n d s i n t h e f u t u r e . I n
bonds, w h i c h returned an annualized
t h e i r 2011 a n a l y s i s of t h e d i a m o n d
-0.1 p e r c e n t a n d 3.3 p e r c e n t , respec-
industry. Bain & Company concluded
tively, d u r i n g that same p e r i o d , a nd
"in
y o u c a n see w h y d i a m o n d s are catch-
r o u g h d i a m o n d s is set t o o u t p a c e sup-
i n g t h e eye
ply under all considered
of investors . F u r t h e r -
the next
decade, d e m a n d
for
scenarios,
more, m a n y expect that increasing
indicating a strong positive outlook
d e m a n d for d i a m o n d s f r o m c o u n t r i e s
for t h e i n d u s t r y . " O t h e r pluses: D i a -
like China and India—coupled w i t h a
monds tend to have low price volatil-
relatively fixed s u p p l y — w i l l drive up
i t y a n d are easily t r a n s p o r t a b l e .
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RETURNS BE T WEE N 1 9 9 9 - 2 0 1 0
INVESTMEN T O PTI O NS
• • •LT WHITE DIAMONDS
COLORED DIAMONDS
GLOBAL STOCKS
D e m a n d for these stones is e x p e c t e d to g r o w as t h e r a n k s of the uber-wealthy i n countries like C h i n a a n d I n d i a swell, a n d these diamonds' rarity and quality allows t h e m to b l o w past m a r k e t expecta-
w
t i o n s . F u r t h e r m o r e , the prices for h i g h - q u a l i t y c o l o r e d diam.onds a n d large (lO carat or more) h i g h q u a l i t y so m u c h nuance i n t h i s m a r k e t t h a t
w h i t e stones have a p p r e c i a t e d about
y o u n e e d an expert: T w o stones of
15 percent a n n u a l l y over t h e past
chase stocks of d i a m o n d or m i n i n g
s e e m i n g i d e n t i c a l stats m a y trade for
five years, says E d a h n G o l a n , e d i t o r
You can purc o m p a n i e s or b u y d i a m o n d j e w e h y ,
different prices," says M a r t i n Katz,
of I D E X O n l i n e , a site t h a t prices
b u t stocks are t i e d u p i n t h e compa-
a w e l l k n o w n Los A n g e l e s - b a s ed
d i a m o n d s . (Christie's r e c e n t l y sold
ny's p e r f o r m a n c e rather t h a n p u r e l y
j e w e l e r w h o c o n s u l t s w i t h h i g h net
a 50-carat D-color d i a m o n d for $8.4
r e f l e c t i n g d i a m o n d prices.
w o r t h individuals. "It's like lookin g
m i l l i o n , about t w i c e w h a t it w e n t for
at t w o examples of t h e same artist's
j u s t seven years e a r l i e r . ) Gelb, the
chase loose d i a m o n d s t h r o u g h a
work from a period—even though
g e m o l o g i s t , says t h a t p i n k d i a m o n d s
wholesale d i s t r i b u t o r or at a u c t i o n ,
it's t h e same person, the pieces m a y
are p o p u l a r r i g h t n o w (80 percent of
or b u y i n t o a d i a m o n d f u n d . B u t
Instead, some investors pur-
sell for v e r y differen t prices." Locat-
t h e m come f r o m A r g y l e , an A u s t r a -
t h e s e h a v e issues too: W h e n b u y i n g
i n g t h e r i g h t firm or e x p e r t t o h e l p
l i a n m i n e w i t h o n l y 10 years of life
loose d i a m o n d s , y o u ' l l find t h a t " t h e
y o u invest i n diamonds w i l l take
left), b u t t h a t the prices m i g h t reflect
p r i c i n g is opaque," says T o m Gelb,
research. " O n l y b u y f r o m a firm
t h e i r p o p u l a r i t y ; o n t h e other h a n d ,
a g e m o l o g i s t at D i a m o n d A s s e t
t h a t has a r e p u t a t i o n a n d w i l l s t a n d
c h a m p a g n e d i a m o n d s aren't yet t h a t
A d v i s o r s . T h e r e are p r i c i n g i n d e x e s
b e h i n d t h e p r o d u c t , " says H e n r i
p o p u l a r w i t h investors, b u t m a n y of
like the Rapaport D i a m o n d Report
B a r g u i r d j i a n , t h e C E O a n d presiden t
t h e m are also m i n e d f r o m A r g y l e , so
( w h i c h l i s t s wholesal e prices), b u t
of Graff D i a m o n d s .
t h e i r r a r i t y m a y p u s h prices up. Fur-
d i a m o n d s t y p i c a l l y sell at s o m e dis-
Even i f y o u w o r k w i t h a n expert,
c o u n t or p r e m i u m b e l o w or a b o v e
it's not easy t o get d i a m o n d s at
the list price and k n o w i n g the
wholesale prices, says M a x K a n t e l i a ,
g o i n g - r a t e d i s c o u n t s is d i f f i c u l t .
the C E O of M c L a r e n G l o b a l Part-
t h e r m o r e , "you're u s u a l l y b e t t e r off w i t h a s m a l l e r stone of h i g h q u a l i t y t h a n a larger stone of m e d i o c r e q u a l ity," says B a r g u i r d j i a n of Graff. " I t ' s easier t o resell h i g h q u a l i t y : L i k e
M o s t people j u s t aren't g o i n g to
ners. There are a l i m i t e d n u m b e r of
k n o w h o w t o find a d i a m o n d whole-
p a r t i e s w h o get d i a m o n d s at these
saler or be e x p e r i e n c e d e n o u g h t o
prices ( t h i n k the Tiffany, Graff a n d
m a k e a n i n f o r m e d purchas e at a
H a r r y W i n s t o n s of the w o r l d ) , a n d
d i a m o n d a u c t i o n . A n o t h e r o p t i o n is
they've h a d relationships w i t h t h e i r
to w o r k w i t h a c o n s u l t a n t . "There's
suppliers for years. Those h o p i n g t o
i g n o r e s m a l l e r stones. "To r i c h
4 WAYS T O INVEST IN DIAM O N DS Diamond or mining companies' stocks Diamond jewelry Loose diamonds through a wholesale distributor or at auction Diamond fund
v e r y fine, rare p a i n t i n g s , o n l y t h e e x t r a o r d i n a r y ones reach t h e v e r y h i g h prices." B u t t h a t doesn't m e a n y o u s h o u l d
a v o i d direct exposure to these issues
people, t h e 1 carat is unsexy," says
b y g o i n g the route of the d i a m o n d
M a r t i n R a p a p o r t , t h e f o u n d e r of t h e
f u n d also face challenges: There
R a p a p o r t I n d e x — b u t because de-
aren't a lot of d i a m o n d f u n d o p t i o n s,
m a n d tor d i a m o n d s a m o n g t h e m i d -
a n d there are c u r r e n t l y no d i a m o n d
d l e classes i n d e v e l o p i n g c o u n t r i e s
ETFs t h a t invest solely i n p h y s i c a l
is g r o w i n g r a p i d l y , t h i s s e g m e n t of-
d i a m o n d s . S t i l l , t h e r e are g a i n s
fers i n v e s t m e n t o p p o r t u n i t y too. I f
to be m a d e i f y o u c a n clear t h e s e
y o u want to go t h i s route, consider
h u r d l e s . Here's w h a t y o u ' l l w a n t t o
a d i a m o n d f u n d t h a t has e x p o s u r e
u n d e r s t a n d before y o u decide t o
t o these, says G o l a n . S i n g a p o r e D i a -
invest i n diamonds.
m o n d E x c h a n g e offers a few o p t i o n s c o n t a i n i n g smaller diamonds and
" T H E R E ' S S O MUCH N U A N C E IN T HIS M ARKET THAT Y O U N EE D AN EXPER T : T W O S T O N ES O F SEEMIN G I D EN T I C A L ST A TS MAY T R A D E F O R D I F F ER E N T PRI C ES, " SAYS MARTIN KATZ.
p l a n s are i n t h e w o r k s for at least a couple o t h e r f u n d s t h a t w i l l offer e x p o s u r e t o s m a l l e r stones (see Fund Newcomers on right).
1
COMING AND GOING
LOCATING THE 10 RICHEST DIAMOND MINES AND THE THREE LARGEST IMPORTERS
< m —I
z • > S o z o
CD
FUN D N EW C O M ERS
MINIMUM INVESTMEN T
THE B O T T O M LINE
N e w York-based I n d e x I Q has p u t i n a n applicat i o n w i t h the Securities a n d
Experts differ o n the amount, but
Exchange Commission to launch
t h e i r estimates range f r o m about
a diamond-backed exchange-
$250,000 t o $1 m i l l i o n , at m i n i m u m .
r e s e r v a t i o n s : " A d i a m o n d is n o t
traded fund. Famed jeweler
N o m a t t e r what size i n v e s t m e n t y o u
a n i n v e s t m e n t , it's a keepsake,"
H a r r y W i n s t o n is c o l l a b o r a t i n g
make, "make sure t h a t d i a m o n d s
says V r a m M i n a s s i a n , f o u n d e r o f
w i t h Swiss-based D i a m o n d Asset
aren't more t h a n 1 to 2 percent of
j e w e l e r V r a m . But m a n y o t h e rs
A d v i s o r s to create a n i n v e s t m e n t
y o u r portfolio," r e c o m m e n d s E l i
see d i a m o n d s i n a m o r e o p t i m i s -
f u n d t o l a u n c h e a r l y t h i s y e a r.
B u t n a r u , the C E O of M o r a W e a l t h
tic light: "There is n o question
A n d the Rapaport Group, w h i c h
M a n a g e m e n t . " D i a m o n d s are for a
about the value of diamonds,"
operates one of the world's l a r g -
well-diversi&ed investor w h o want s
says G o l a n . T h i s is a n i n v e s t i n g
est d i a m o n d p r i c i n g s e r v i c e s ,
to add s o m e t h i n g u n i q u e , some-
area best left t o t h o s e w h o e n j o y
plans to launch a diamond fund
t h i n g p r e t t y u n c o r r e l a t ed w i t h t h e i r
e x p l o r i n g these b e a u t i f u l objects
t h i s y e a r as w e l l .
other investments, b u t it shouldn't
a n d c a n f i n d a c o n s u l t a n t to h e l p
be a core p a r t of y o u r portfolio."
guide them. ®
II
Some e x p e r t s h a v e
" M A KE SU RE T H A T DIAM O N DS A RE N ' T M O RE T H A N 1 T O 2 PER C E N T O F Y O UR P O R T F O LI O , " RECOMMENDS ELI BUTNARU, THE CEO OF MORA WEALTH MANAGEMENT.
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