I – What is an Investment Diamond? Among the 25% of polished diamonds used as gemstones, only 2% are eligible to be considered investment grade diamonds because of their top quality features according to the “4 C’s” grading: such a rarity is the main factor for an everlasting demand, not met by supply and thus a continuous price appreciation! Features of an investment diamond: Shape: Round (brilliant) Carat: More than one Carat Color: D, E (Exceptional White), F, G (Rare White) Clarity: FL, IF (Flawless), VVS1, VVS2 (minute inclusions that are very difficult to see under a 10X loupe) Cut: Ideal, Excellent or Very Good
I – What is an Investment Diamond? To provide a concrete example of rarity: the world - GIA in New York (Gemological Institute of production of premium cut diamonds in D Color and IF America) Clarity from 1 to 1.49 Cart is less than 900 Carats per - HRD in Antwerp (Hoge Raad Voor Diamant) year meaning less than 750 stones! To produce these - IGI in Antwerp (International Gemological 750 exceptional diamonds mining companies must dig Institute) more than 800,000,000 tons of Kimberlite, the rock Certificates and valuations from the Gemological which rough diamonds are found! Institute of America (GIA) have the widest international acceptance. For this reason, a certificate from this Investment diamonds must be purchased in a sealed organization is a great advantage in later diamond package, accompanied by an authenticity certificate sales. established by the independent laboratories which are recognized worldwide. Other reputable and professional diamond institutes include Hoge Raad Voor Diamant (HRD) and the The certificate address the criteria of quality, examined International Gemological Institute (IGI). A laser by one of the following official independent engraving of the certificate number on the girdle of the institutions: diamond is a further confidence-building factor. While engraving is not absolutely essential to be able to identify a diamond with certainty, it is occasionally popular with private investors.
II – The Top 10 Reasons to Invest in DiamondsII-I A Diamond Does Not Go Bankrupt II-II A Great Store of ValueDiamonds still hold an intrinsic value and Like any long-term tangible asset,have for millennia, for they are tangible diamonds also offer a hedge againstassets and not a paper asset that relies on inflation because they retain their intrinsicthe assurance of a third party and value irrespective of currency changes.represents their debt. Diamonds have one This has been demonstrated through manyfundamental quality that renders them studies that show how diamond pricesunique compared to other financial have preserved purchasing power for theirproducts: they do not present any credit owners over long periods of time.risk. Upon taking possession of one’sdiamonds, an investor is no longer exposedto the failure of a third party. Like gold, adiamond is a tangible asset that can beliquidated at any time.
II – The Top 10 Reasons to Invest in Diamonds II-III An Universal Asset Unlike other gemstones, diamonds are valued according to a catalog of internationally applicable criteria. Diamonds are sought after all over the world, and wherever they are the same criteria are used to establish evaluation. Assessment criteria for diamonds have been defined by various international gemological laboratories (G.I.A. was the first in 1931) and are structured around four main concepts (cut, color, clarity and carat). The Rapaport Diamond Report, a tool designed specifically for professionals, allows for the financial value of any stone to be established. Created in 1978 by Martin Rapaport, a member of the World Diamond Council, these lists of diamond prices have today become the basis for all global diamond transactions. Because of their universal appeal, diamonds are one of the major investment alternatives. They can be used everywhere in the world as a form of payment in transactions, all the more so when their value is established and recognized.
II – The Top 10 Reasons to Invest in Diamonds II-IV A Diamond is Forever Diamonds are the precious stones with the greatest hardness. Unalterable and indestructible, diamonds cannot be affected by natural elements, such as humidity or temperature: they are not subject to any preservation risks. Its integrity is preserved for centuries. Investment diamonds therefore present the significant advantage of not requiring any management fees!
II – The Top 10 Reasons to Invest in Diamonds Declining supply: Although demand for diamonds III-V The Market Fundamentals are shows continued strong growth, diamond supply is Very Bullish growing by a mere 2.8% p.a. because many major diamond mines are already depleted and to date no Although diamond mining has already surpassed its comparable new deposits have been found. Global global peak, global demand continues to rise volumes of mined diamonds have been declining since considerably. A study by the Antwerp World Diamond Center (AWDC) predicts that demand for 2003. While new deposits of diamonds have been diamonds will double by 2020 as diamond supply found, they are all in inaccessible regions, requiring stagnates at best, thus leading to a significant complex methods such as extremely costly offshore increase in diamond prices. Increased demand: The mining on the sea bed. AWDC experts predict annual growth of approximately 6% assuming that demand for diamonds will continue to rise steeply as wealth grows in the extremely populous developing economies of India and China. Demand for diamonds in these countries is forecast to equal that of the USA – previously the largest gemstone market in the world – by 2020. In addition, diamonds are particularly sought after as an investment in periods of economic instability; this trend boosts demand even in times of economic crisis.
II – The Top 10 Reasons to Invest in Diamonds II-VI A Performing Asset The techniques developed allow to analyze the effects of any factor, economic, cultural or political upon diamond Diamond prices have risen steadily throughout the past trade including demand (both regional and global), 50 years of 5 to 10% annually on average. Even the 2008 financial crisis triggered no more than a slight supply (rough being mined), manufacturing techniques, decline in prices for some carat sizes, which was more prices (rough and polished) and stocks. The forecasting than compensated for by their appreciation in model, allows for the comparison of Demand, Supply subsequent years. See Price trends since 1960: The and Stock Changes to produce forecasts of prices for example of a one-carat diamond in brilliant cut of each of the rough and polished categories followed. The excellent quality in color D and clarity IF shows the price forecasts give a central forecast for diamond prices strong and relatively consistent increase in diamond for the next five to ten years. prices in US dollars over the period since 1960: a one carat diamond with the best 4C characteristics is currently valued at around $30,000, while it was valued at only $15,000 in 2002, a 100% increase in 10 years! Forecast of future diamond prices have been computed by Diamond Forecast LTD, using a scientific econometric model incorporating a database designed to be a central depository for all information relating to the diamond industry. The database contains history and forecasts for the macro-economic factors that have a bearing upon the diamond industry.
II – The Top 10 Reasons to Invest in Diamonds The model yields a potential doubling of the price of polished diamonds from 2012 to 2022. A base case scenario for the next 10 years of a return on investment (ROI) of 10% p.a. seems conservative and consistent with historical data.
II – The Top 10 Reasons to Invest in Diamonds II-VII A Diversification Asset Investment diamonds are a long-term investment that generates capital investment appreciation. The diamond market is negatively correlated to other financial asset types thus offering diversification benefits when added to an investment portfolio. Also, the diamond market is purely physical, does not generate unstable derivative products and not linked to currencies: it is, therefore, not bound by geopolitical considerations or potentially related manipulation.
II – The Top 10 Reasons to Invest in Diamonds II-VIII A Stable Asset, Even in Time of Crisis Investment diamonds are a very stable investment. Its volatility is about half of the volatility of gold. Furthermore, compared to other assets, the low volatility of polished diamonds is marked by a high degree of regularity in its progression thus generating an optimal “risk-return” investment. An examination of diamond prices in the years 2008 and following clearly shows that the overall minor declines in price had already been made up by 2010. For example, prices of one-carat diamonds did not fall at all although their price appreciation stagnated for a short period. It can thus be seen that diamond prices fluctuate far less than the prices of conventional stocks and shares.
II – The Top 10 Reasons to Invest in Diamonds II-IX The Highest Concentration of Value Diamonds concentrate the maximum value in the smallest possible form. Sealed investment diamonds are very easy to transport. By way of explanation for a top rated 4C diamond: This can be strikingly demonstrated in a comparison with gold: for a top rated 4C diamond: 1 gram of diamond is worth 1 million dollars US, which is the value of 20 kilograms of gold (based on a gold price of 50.000 dollars/kilogram)!
II – The Top 10 Reasons to Invest in Diamonds II-X The Owner is the Bearer Diamonds are the most confidential investment that exists for the owner is the bearer: the purchase of diamonds is not subject to registration requirements, enabling the owner to preserve anonymity more easily. Unlike gold or property, diamonds have never been subject to prohibitions on ownership or confiscation. As a consequence, it is an investment product that is easily passed from generation to generation. This brings a further heritage-related dimension of wealth to add to its financial relevance.
III-I Investor Considerations III-I-I Budget & Asset Allocation A preliminary consideration for each potential investor is to assess a specific budget for the acquisition of diamonds. Although there are many parameters to factor in while deciding on an investment budget, a key element to consider is the relative weight of the potential investment compared to investor’s total portfolio/wealth. Investment diamonds are alternative investments and transportable “hard assets”, such as precious metals. It is widely established that a private investor should allocate at least 10% of total net worth into hard assets, up to 20% in times of crisis. It is our recommendation to split this allocation half in gold bullion half in diamonds.
III-I Investor Considerations III-I-II Time Horizon: Long Term or III-I-III Investment Profile: “Trading Scenario”? Conservative or Dynamic? Another crucial parameter to look at before What is the main purpose of the investment investing is the maturity or time horizon considered: to protect one’s wealth in these anticipated for holding a given investment, times of massive debt burdens and financial before considering selling it. Diamonds must be crisis or to seek a dynamic asset able to reviewed as long term investments, not for generate capital gains over the years? The short term “trading” purposes. Although one beauty of diamond investing is that investors could successfully buy a top quality investment can get both protection and profit but to diamond at a bargain price and sell it back with achieve such a remarkable performance, a profit in a relatively short time period, this diamonds should be carefully selected according “trading” scenario is not the most common for to the following guidelines. private individuals who are not professional “diamantaires”. We do recommend a minimum holding period of three years at least whilst considering the investment diamonds option.
III-II Which Diamonds to Select? III-II-I Common Features: “4C” & Certificate & Laser When purchasing an investment diamond, several prerequisites must be fulfilled: as seen in the definitions section, the features of an investment diamond are: Shape: Round (brilliant) Carat: More than one carat Color: D, E, F, G Clarity: FL, IF, VVS1, VVS2 Cut: Ideal, Excellent or Very Good Also, the stone must be delivered with an original certificate from one of the following official independent grading institutions: GIA, HRD or IGI. A laser engraving of the certificate number on the girdle of the diamond is highly recommended to associate the stone with the certificate. Finally, a tamper-proof seal provided by the institution to carry the stone is definitely a big plus and makes it so much easier to store and transport the stone.
III-II Which Diamonds to Select? III-II-II Main Value Driver: Carat decrease in price in times of crisis (such as in 2008), whereas 2 or 3 carat stones show minor A very important consideration to bear in mind while investing in diamonds is the exponential declines that are made up after about 2 years. factor related to the weight expressed in carats These 2 or 3 carat stones gain more in times of (1 carat equal to 0.20g). The price per carat of general price appreciation than 1 carat stones. two similar stones increases exponentially with So a general rule of thumb would be to its carat weight. In other words, one 2 carat diamond is much more expensive than two 1 stipulate that 1 carat stones are a more carat diamonds of the same “4C” features. For conservative investment option while 2 or 3 example, a diamond that is double the size of carat stones are more dynamic. another similar can be up to four times the price! For a given budget, and depending on the This makes the carat weight the main value investment profile, it is recommended to driver of a stone and for a given budget, it consider the purchase of either the largest makes sense to buy heavier stones. However, possible stone or a portfolio of smaller 1 carat specific studies on the variation of diamond stones that would also provide a better prices have shown that smaller stones, such as 1 carat, are more stable and do not liquidity in the future.
III-II Which Diamonds to Select? III-II-III Other Value Drivers: Color, Clarity & Cut Carat weight, of course, is not the only factor determining value and prices. One should be very careful about the three other C’s: Color, Clarity and Cut. As a general rule, it may be considered that the whiter, the purer, the better cut the diamond is, the faster the price will appreciate because of the rarity effect we have previously described. However, diamonds that are not the very top graded but “investment grade”, such as F/G colors and VVS1/2 clarities tend to catch up the price appreciation of top graded stones but it takes more time. Since these stones are bought for lower USD per carat prices, they offer a better “quality / price ratio” in dollar terms and can be considered more dynamic investments whereas top graded stones are, in comparison, a more conservative investment option.
III – How to Invest? 1- AdAmiA is a member of RapNet, the world’s largest III-IV Liquidity Considerations diamond trading network, with about one million stones on the platform, located in 80 different countries, thus offering Selling a diamond is another crucial challenge for a wide opportunities to market a stone at the most efficient private investor. As we have seen before, diamonds are meant to be long term investments that can be passed price. from generation to generation. However, any owner of investment diamond(s) should be in capacity to sell this 2- AdAmiA’s CEO is a member of the Diamantkring of Antwerp, asset within a reasonable time and at a fair market price. the oldest and leading diamond exchange “bourse” and member of the World Federation of Diamond Bourses, thus Although it is possible to address directly, the market in having the privilege of physical access to the 26 diamond order to sell a diamond (through multiple options such as auctions, local jewelers, Internet market places…) the exchanges in the world, another key consideration to market a possibility exists that this will be a time consuming diamond at the most competitive price. process with no guarantee of obtaining a fair price, many “professional” diamond buyers being opportunistic and seeking cash strapped sellers to offer 3- AdAmiA’s CEO is a former private banker and wealth a meager bid price… manager and therefore entertains a wide network of high net worth individuals that can be offered an attracting opportunity We at AdAmiA are committed to offer a true liquidity to to purchase a great diamond for either investment or jewelry our customers and therefore, we will make an offer to purposes. repurchase any diamond sold by us. 4- AdAmiA’s CEO is an alternative investments specialist with a Our offer will be based on current market prices and conditions and we are proud to assert that this will be a trading office in Paris on the prestigious Place Vendome, home competitive offer because of the following compelling of the most luxury jewelers in the world such as Cartier, Van reasons: Cleef & Arpels, and Boucheron. Such jewelers are always potential buyers for top quality gemstones.
Contact Information email@example.com www.Investment-grade-diamonds.com Office in Antwerp Office in New York AdAmiA BVBA AdAmiA BVBA Diamond Plaza 3 Columbus Circle Hovenierstraat 55, B.66 New York, NY 10019 2018 Antwerp, Belgium Phone: Phone: +32 (0) 220.127.116.11 Office in Hong Kong AdAmiA BVBA Two International Finance Centre Level 19 8 Finance Street, Central Hong Kong Phone: + 852.2251.1672
Laurent Mathiot’s Profile In 1989, having graduated from In 1997, he became Deputy Director General of La ENSAE as an Actuary, he started Foncière de Participations, managing a team of 50 his career at Banque Paribas as a employees and carrying out numerous asset Financial Analyst in the Asset arbitrations aimed at wealth structuring, as well as the Management department, implementation of the Group’s investment strategy. In responsible for creating (through 2001, with this strong experience, he specialized in the econometric and actuarial area of Asset Management and became CEO of a modeling) a tool to aid investment Family Office located in London. It is in this context decisions. This work contributed and in view of the troubling situation in global to the launch of one of the first financial markets that he led, in 2007, a major cross- guaranteed capital structured sectional study around one subject: new strategies in funds in the Paris financial market. global wealth protection. The conclusions of this work brought to light the relevance of tangible assets like In 1993, having obtained an MBA gold and diamonds. After successfully starting AurAriA, from Wharton School of Business, an ecommerce site selling investment gold, in 2009, he served as Chief Financial the continuity of these reflections on alternative Officer at L’immobilière de Crèdit, investments led him to start AdAmiA in 2012. a financial company authorized by the Bank of France and supervised by the Banking Commission.