Rare Pink and Blue Diamonds..the next asset class for investment portfolios?

The financial collapse in 2008 significantly reduced the value of investment portfolios and with the downturn, the equity, bonds and housing markets plummeted and certain commodities started to fall out of favour with the savvy investor. I have witnessed clients turning to alternative investment platforms such as Historical Artefacts, Fine Wines and Gold included in their portfolios. With the recent publicity generated  by auction houses in Hong Kong, Geneva and New York, financial institutions, wealth managers serving HNW and UHNW individuals from emerging markets are seriously taking an interest in Fancy Colour Diamonds (FCD) especially the rarer Pinks and Blue diamonds. Why?

To give an explanation of these truly magnificent colours from source to the diamond cutter merits an educational blog which I will post at later date. To summarise, the drivers for investment include:

 

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Colour: The colour of Blue in diamond is caused by trace elements of boron during the crystallisation process of rough diamond. The Pink colour is not caused by trace elements but through deformation of the crystal lattice under intense heat and pressure. The more intensity of colour of FCD determined by hue, tone and saturation, the more valuable the diamond. The investment buyer should buy into a primary colour e.g Fancy Vivid Blue than hybrid colours e.g Fancy Vivid Greyish Blue.

Rarity: Unlike the FCD colourless diamond counterpart, the pinks and blues are incredibly scarce. To give you some idea, the Argyle mine in Australia, a primary source for  pinks yield an annual tender of approximately 60 diamonds from an 18 million annual mine production and the sizes of these diamonds only range from 0.50 carat to 1.50 carat. There is talk that the Argyle mine will cease production by 2019 and unless a new source is discovered factoring in a 10 year timescale to full production, these FCD colours will dramatically increase in price. The larger pinks and blues only surface at auction and currently are realising record prices per carat.

Resilience to adverse economic climate: Since tracking began over 35 years ago the rarer colour FCD’s have never decreased in value unlike their colourless diamond counterpart. Global demand from Asia, Russia, North America and Europe quite simply exceeds supply for HNW looking for a tangible asset class with a great portable store of value.

Price discovery: Is essential for investment. Transparency of FCD pricing has previously been gauged with sales pricing at auctions as FCD’s are not tied in with a globally priced market like their natural colourless counterpart. This can be misleading as estimates can be so far away from realised pricing and gives no indication of buyers and sellers premiums paid on top of hammer price. Price discovery can be sought with experts within the industry who can offer a niche service.

To conclude this blog, if you are considering investing in pink and blue FCD, then I would recommend a significant entry level and ensure you have to hand an expert that can advise best choice of primary FCD to meet brief, authenticate certification and facilitate market access for resale over a reasonable timescale. Please note the diamond market in the United Kingdom is not regulated by the Financial Conduct Authority (FCA). I advise you perform due diligence with any party selling fancy colour diamonds for investment.

Or more importantly, why not give your partner a celebration piece of jewellery set with a rare FCD.  With investment aside, what better way for your partner to wear, partake and experience one of nature’s rarest creations?