Diamonds are an investor's best friend

18 February 2009 - Tara Loader Wilkinson for eFinancialNews

While gold hits a new high

A fund offering access to physical diamonds is being launched to take advantage of investors' appetite for physical assets they hope will avoid the turbulence in securities markets -- as illustrated by rise of physical gold prices to a seven month high.


The KPR diamond fund capitalises on the price appreciation of top quality colourless diamonds.

The diamond fund aims to provide returns which are not correlated with traditional asset classes, act as a hedge against inflation and benefit from the supply/demand imbalance over the long term.

The fund, which is part of KPR Fund, a Cayman Islands open-ended investment company, launches on March 2 2009, with a minimum investment of $250,000. Investors can also purchase stones on selected diamond sales by the fund at a wholesale price.

The move comes weeks after Alfa Capital, the Russian investment group controlled by the oligarch Mikhail Fridman, launched a similar fund a fund for its high net worth clientele investing solely in diamonds, with an estimated yield of 15-17%.

Giovanni Pennetta, chief executive of Goldwinds Asset Management, the fund's investment adviser, said: “The long term outlook for diamonds is robust. We are confident that this fund will provide the means for investors to diversify their portfolio and gain exposure to physical diamonds in a cost-efficient way. We see this as a huge investment opportunity that investors should not miss.”

Separately the gold market is also shining, with demand for physical bars and coins rising 87% last year and shortages reported across many parts of the globe, according to the World Gold Council.

Investment demand for gold, which includes exchange traded funds, was 64% higher in 2008 than 2007, equivalent to a further inflow of $15bn. Over the year as a whole, the gold price averaged $872, up 25% from $695 in 2007.

Aram Shishmanian, the new chief executive of World Gold Council, said: “The economic downturn is unlikely to abate in the short term. Consequently, I anticipate that gold, as a unique asset class, will continue to play a vital role in providing stability to both household and professional investors around the world.”

Gary Dugan, chief investment officer for Merrill Lynch Global Wealth Management EMEA said on gold: "The fragility of confidence is forcing investors back into safe havens, with gold the top beneficiary. Gold is benefiting from massive ETF inflows as traditional demand from areas such as emerging market jewellery has largely collapsed. It looks as if we will see a test of the $980-990 resistance very soon. Distressed financial sectors highlight the merit of precious metals as a secure store of value, while overly successful monetisation of debt threatens sharply higher inflation down the line".