April 11, 2013
Original Source: PR Newswire
By: Pauline

Investing in diamonds – Undertapped, Underappreciated and Undervalued

The last decade has resulted in severe global economic imbalances as we have witnessed the indiscriminate printing of paper money by global central banks. Within this context institutions, family offices and wealthy individuals have seen hard assets (real estate, commodities and precious metals) surface as an important pillar of their strategic asset allocation mix.

As we move down the commodity spectrum, precious stones as a "hard asset equivalent" has gradually begun to intrigue investor interest, however there have been few opportunities to invest in this asset class within an institutional framework.

Price appreciation

Polished diamonds make a compelling case as a hard asset investment. According to the Financial Times (March 2013), from 1999 to 2011 three-carat diamonds increased by 145 per cent, while five carat diamonds rose by 171 per cent (the segment in which Diamond Capital Fund trades), as measured by the Rapaport Diamond Trade Index.

However, the strength in diamond prices is not restricted only to smaller stones. The Sotheby's New York annual spring auction of Magnificent Jewels on April 17, 2013 has on offer a 74.79-carat potentially flawless pear-shaped diamond with a presale estimate of $9 million to $12 million (diamonds.net). This stone was acquired by its present owner in 2001 for $4.3 million and is expected to sell at approximately three times its original purchase price.

Bottom up investment opportunities

Investors have traditionally sought exposure to diamonds by indirectly investing in publicly traded stocks of mining companies or high-end jewelry retailers. However, these are investments in operating companies and subject to company specific and financial market risks.

Diamond Capital Fund (DCF) was launched 18 months ago by industry veterans to offer an investment vehicle through which investors can directly participate in an actively managed trading portfolio of physical "liquid" Diamonds within an institutional framework.

Backed by an underlying portfolio of diamonds ("hard assets"), DCF actively trades in high quality, polished and certified physical diamonds of one carat and more while seeking to deliver stable and uncorrelated returns to investors; a so called "Alternative to Alternatives". Not only do investors benefit from the appreciation in the value of diamond portfolio, but seek enhanced returns by participating in trading gains.

DCF has completed over one full year of operations and reporting to investors subsequent to its initial round of funding from a select group of family offices and investors from the diamond industry in Sep. 2011. The fund was up about +3.9% (Oct. 2011 to Jan. 2013) on the back on a marginal appreciation in diamond value coupled with strong trading gains.

About Diamond Capital Fund

• DCF is a sub-fund of Capital Investments (SICAV) p.l.c of 188, Old Bakery Street, Valletta, VLT 1455, Malta.

• This information is being issued by Capital Investments (SICAV) p.l.c., which is an open ended collective investment scheme licensed by the Malta Financial Services Authority ("MFSA)

• Capital Investments (SICAV) p.l.c. has engaged Diamond Management Advisors (Malta) Limited as the Manager of DCF

• DCF is licensed to target sophisticated investors. Investment should be based on the full details of the applicable offering document and in particular to the relevant risks outlined therein.

• DCF offers investors quarterly redemptions

• The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance.

These articles are provided for informational purposes only and were obtained from publicity available sources on the Internet. These articles do not constitute financial advise or trading recommendations by Global Asset Management ("Global"). Global neither warrants the accuracy or completeness of the information contained in these articles, undertakes to update them, nor is it responsible for any omission or error contained in these articles. Viewers are encouraged to conduct, and should only rely on, their own independent research.
The purchase or sale of precious metals involves substantial risk and volatility. If you are contemplating purchasing and/or selling precious metals, you should consult with an independent financial advisor to learn about the inherent risks. Global does not render, and nothing in this website should be construed as, financial advise, a trading recommendations or a solicitation for the purchase or sale of precious metals.
 
 

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