Diamonds: The Best Friends of Ultra Wealthy Investors
The diamond industry is notoriously secretive. Some of the world’s leading diamond dealers are largely unknown, including Indian companies Rosey Blue and EuroStar, Israel’s Leo Schacter and Lev Leviev, and Russian-government-backed miner Alrosa. Their clients, who are among the wealthiest and most secretive individuals in the world, prefer to keep low profiles.
“The market is very un-transparent and revolves around a very small, closed community,” said John France, a jeweller in Milan who sells diamonds to the ultra wealthy.
It’s not an exaggeration to say that the diamond industry belongs to the ultra-rich. Most of the buyers’ net worths easily exceed tens of millions of dollars and because of this sensitive nature, dealers like Rosey Blue and Lev Leviev keep their clients’ identities hidden. Especially since these wealthy individuals also prefer to keep low profiles.
This is why the revelation about the buyer of “the largest and most perfect briolette diamond ever sold at auction” made ripples in the diamond industry. Widely known as Tiffany Chen, Ming Yin Chen revealed that she’s the one who bought the diamond at Christie’s auction house earlier this month.
Chen, the 57-year-old multi-millionaire vice chairman of China Star Entertainment, a film production company, renamed the 75-carat diamond “The Star of China” after she purchased it for US$11.15 million in May, setting a world record for an auctioned briolette diamond. She has a net worth of at least US$55 million, according to Wealth-X, a research firm that tracks the ultra-wealthy.
According to a consultant at Bain & Co., the demand for these tangible assets is projected to increase by as much as 60% by the latter part of the decade. Because of the growing appeal of diamonds in China and India, it will boost international trade to US$26.1 billion by 2020, a stark contrast and dramatic rise from the $15.6 billion in 2010.
But it’s important to note that ultra-high net worth (UHNW) individuals don’t just pick any diamond. They have a particular interest in rarity, colour, and clarity of the jewel. Quality is an important factor when weighing in decisions. Stones of E or F colour and VVS clarity are also highly sought after according to Vickie Sek, director of the Asia Jewellery & Jadeite Department at auction house Christie’s. “For coloured diamonds, pinks and blues are the most desirable. UHNW buyers are looking for a colour grading of Fancy Intense or above.”
Experts claim that dealers and auction houses are the most sought upon market sellers than retailers when it comes to top jewels. They can leverage this advantage to sell high-grade diamonds to UHNW individuals (those with US$30 million in assets and above) which increased for about 0.6 percent last year to 187,380, with a combined global wealth of US$25.8 trillion. Wealth-X forecasts that the growth of the UHNW population – particularly in countries such as diamond-hungry China and India – will accelerate.
Because of these new streams of business, the diamond industry continues to thrive and grow apace. Bankers, fund managers, family offices and wealth managers, led by those in Hong Kong and Singapore, are increasingly advising clients to gain exposure to this physical asset class.
According to Edward Alvarado, a director at diamond dealer Diamintel, in today’s market and since the global financial crisis, diamonds have surpassed traditional investments like gold and stocks.
Because of this unprecedented growth, new dealers with rich connections are coming to the fore. John France, a former lawyer now a jewellery broker, has established JF Diamonds in Milan.
He claimed that his clients often grumbled about their frustrations on sourcing trusted suppliers of diamond jewellery. His clients hail from the billionaire hotspots of Monte Carlo, Gstaad, Dubai and Moscow, where wealthy individuals have weathered the global crisis with barely a scratch.
The long-term appeal of diamonds is clear. Diamonds have shown steady growth over the last two decades, have a proven track record and have a limited supply against growing demand. On top of that, they look much better than a stock certificate.
A shining example of a secure and lucrative alternative asset, diamonds are becoming the investment of choice for an ever-increasing number of UHNW individuals.
Originally published by Wealth-X