Twenty years ago a one-carat, fancy, vivid, internally flawless pink diamond would have sold for approximately $70,000 a carat. Today, that same diamond could be worth more than $750,000. In October 2007, Sotheby’s Hong Kong broke an auction record, which had stood for over twenty years, when it sold a 6.04 carat, internally flawless, emerald-cut vivid-blue diamond ring for US$7,981,835. The per carat record was once again topped at Sotheby’s this year in Geneva when a fancy, vivid-blue, pear-shaped diamond ring sold for a record of US$1.328 million per carat.

Perhaps you are thinking that the credit crunch will influence demand? Think again, at least when it comes to coloured diamonds. Even through the recent market downturn, coloured diamonds have appreciated. As James Allan of South African finance group Allan Hochreiter says, ‘If you are actively involved in the production and sale of diamonds, the future looks extremely bright.’

So, it is little surprise that, at a time when other assets are experiencing heavy turbulence, high-net-worth individuals are looking for new ways to diversify their holdings. A new fund focused on the acquisition of rare coloured diamonds, offers such diversification. It allows its investors to gain exposure to this market with a starting investment of $1 million and a maximum of $10 million dollars, with $100 million as the target total size.

The founders, Mahyar Makhzani and Philip Baldwin, believe the gems to be both a highly attractive investment and also a hedge against market turbulence and political crises. The fund does not touch rough diamonds, which are far too risky. Instead, the diamonds are acquired through traders or cutters in New York, Tel Aviv, Geneva and London or through auction houses and private sales. Although the price of white diamonds fluctuates, natural fancy coloured diamonds remain the most valuable gemstones as measured on a price-per-carat basis. Alan Bronstein, curator of the Aurora Collection (the world’s most famous collection of coloured diamonds) and leading adviser to jewellers and investors, explains that, for long-term investors in particular, ‘coloured diamonds are a fantastic investment’. In order to maximise the benefit, he recommends the gems be kept for at least five years. ‘However, if it is just a hold for intrinsic value, a hold for diversification, then a year could be fine.’

Pastor-Genève b.v.b.a., Brusselstraat 51, B-2018 Antwerpen, Belgium

Tel: + (0) 32 3 244 1871 Fax: + (0) 32 3 244 1873

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