During this period of financial and physical uncertainty, and in light of the attention the Fancy Color Diamond Index received from the international financial community, we were asked to paint a general background on this asset class and answer members’ many questions about
the investment perspective of these rare gems.
The combination of the words “Fancy Color Diamonds” and “investment” is quite common outside the wholesale market, with many referring to Fancy Color Diamonds as “an
vehicle.” In an industry with little transparency, there are many investment terms being tossed around that are confusing, inaccurate and unrealistic. Generally speaking, investing in Fancy Color Diamonds can be profitable, yet doing so requires investors to calibrate expectations regarding the maturity timeline of this investment,
expected margins, and liquidation platforms. Fancy Color auction results should never be used as a reference for a generic pricing database. In most cases,
Fancy Color Diamonds
offered for sale at auctions are stones that were rejected by professional dealers due to typical quality flaws that make these diamonds “a hard sell.” Diamonds at auction represent a very small and inconsistent sample of the diamonds in the market. In fact, the vast majority of Fancy Color Diamonds outside the auction are… Read more
Behind the Scenes of the Wholesale Ecosystem
As diamond trading turned into an industry, today’s markets maintained their “family business” culture and created a closed, legitimate “ecosystem,” based on high morality, absolute trust, and minimal bureaucracy. Once you become part of this system,
you can enjoy the relatively
fast movement of goods and generate the moderate profits it allows.
Industry Selling Cycles
In the wholesale market, we found three different time cycles for Fancy Color Diamond sales: Fast, Moderate, and Slow.
1. Fast-moving Fancy Color Diamonds will be sold at wholesale within three to
from the moment a gemological report is issued for the stone.
2. A Moderate sales cycle will take one to three years.
3. Slow moving items will be sold between six to ten years.
The Second Tier – Investment Platforms
The second tier includes business platforms that own an inventory on behalf of private investors in order to trade and produce short-term profits. Managers on this tier need to combine the DNA of an experienced diamond wholesaler with the business conduct of a Wall Street fund manager. Furthermore, Fancy Color investment platforms need professional diamond buyers who have access to first-hand sources and savvy collectors who can buy these goods. Such a combination is very hard to find in one entity that is external to the trade. Of the many challenges a trading platform faces, the most prominent is… Read more
The inventory time cycles
Slow-moving items exist in every diamond inventory, and their inherent life cycle is usually longer than the investment proposition offered by alternative platforms.
The second tier also includes investment companies that promote Fancy Color Diamonds as short-term investments. selling more-affordable stones at modest margins, below the one – carat size, and still living up to the profit expectations they promise.
Privately Owned Diamonds
A Fancy Color Diamond mounted in jewelry can be sold globally and privately, much more readily than a colorless diamond can, and without being subjected to any price list or sharp price drops. These stones have a unique value-to-size ratio when compared with other alternative asset classes such as gold, art, vintage cars, or wine. A multimillion-dollar diamond
is an eminently wearable object, giving its owner a strong sense of freedom and independence, two advantages that should not be underestimated in times of crisis. They are among the few multi-million-dollar assets that, in most countries, can be physically handed over to loved ones without being subjected to any legal proceedings.
Unlike larger high-value items that may require storage or maintenance, Fancy Color Diamonds have no fixed costs, requires no maintenance, nor does it take up any space when stored in a home safe.
From interviews conducted with leading jewelry brands, we found that IRR expectations appear low on the list of the end-client’s priorities. The main motivation to acquire Fancy Color Diamonds appears to be the pleasure of exhibiting their refined taste and celebrating their personal success. A Fancy Color Diamond can mature as an investment…Read more