Diamond investment in no way shares the same messiah status as gold and their prices are more prone to fluctuations as compared to precious metals.

The price tracking done by the US-Based IDEX Online Diamond Prices for the polished gems indicates that the diamond prices have declined by a minimum 10% in proportion with the shabby performance of the luxury industry even when the spot gold value has escalated by 25%. Skepticism exists about the real worth of diamond investment. The Geneva-based chairman of jewelry for Europe and the Middle East, David Bennett said at London auction house Sotheby: “Like art, we would not advise someone to buy diamonds for investment purposes, although people do. We feel diamonds should be bought for the joy of wearing them.”

Diamonds as investment has had a notorious record. The last century witnessed the domination marked by a cartel led by mining De Beers mining group. However, the past couple of years have seen the market broaden with Dee Beers having a 45% stake while Russia and Canada have become the leading external suppliers.

Diamond Investment Funds

The rise in the demand for tangible assets and portfolio diversification has triggered the launch of numerous diamond investment funds this year. These funds are believed to have the potential of achieving double-digit returns for investors. A Cayman Island’s domiciled, open- ended investment diamond fund was launched by alternative investment manager KPR Capital in the month of March this year with a minimum investment of $250,000. A fund by investment boutique Emotional Assets Management & Research which invests in collectables extending from fine art and rare stamps to diamonds and diamond jewelry was launched this month. The fund aims a growth rate of 15% per annum with a minimum investment of £100,000.

A London based company named Dazzling capital that invests directly in antic jewelry also entered this sphere.  Former Christie’s auctioneer Humphrey Butler, former jockey and chartered accountant William Sporborg, and Christopher Holdsworth Hunt, co-founder of City brokerage KBC Peel Hunt co-founded Dazzling Capital. It demands a bare minimum investment of £10,000 with a projected 11% return, deems Lady Madeleine Lloyd Webber, wife of the British composer Sir Andrew Lloyd Webber, as one of its investors. Investors can also lease Dazzling Capital jewelry for an insignificant fee of £50. Skeptical investors doubted significant following of diamonds tagging it as too niche.

Swiss & Global Asset Management’s head of equities Scilla Huang Sun, affirmed the absence of diamond investment fund as the class she believed was too narrow to merit a fund of its own. Diamond trading is gaining a class. Till date, gems were looked upon as illiquid assets. Gem valuation was termed more of an art than science due to paucity of auctions. In the month of January though, the Dealers Organization for Diamond Automated Quotes, an online diamond exchange administered by Dutch bank ABN Amro commenced. The Belgium-based exchange endeavors to conquer other conventional barriers to investment in the diamond market, such as high sales fees and low liquidity, and grants two-way auctions for polished diamonds, the first cash market for diamonds. Thus, diamond investment funds offer diversification benefits.