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Alternative investments: a coloured diamond works wonders
The blue diamonds contain boron, the yellows contain nitrogen, and all this calls for extreme care in the cutting
November 22, 2012 | By:
Prices start high and get higher. But is there profit in them pretty stones, or should we buy them because we love them? By Michael Wilson
Money_single coloured diamond_620 Corbis 42-20896786

Stone me, how much for that? Photo of the world's largest coloured Forevermark diamond by Corbis

In such shaky financial times, the money experts will be looking for smarter places in which to entrust your hard earned cash, or as the City argot has it, alternative asset classes.

I  remember ostrich farming being a dead cert in the early 1980s. However, after a flurry of fly-by-night operators, the market turned ugly, rather like the flightless bird, and never got off the ground. In fact, it got so bad that an ostrich investor chum told me he’d already buried his head in the sand.

Other alternative asset classes have included bond washing, villas in Spain, Ponzi schemes; the list goes on.

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But I brightened slightly when I read that coloured diamonds might be the next big thing. After all, a diamond is easy to conceal and transport if times get bad, and there’s no shelf life. It is, by very definition, a hard asset.

For high net worth individuals

Chris Blacklock, of family-owned firm Blacklock Jewellery, says, “Due to the financial crisis, alternative investments are the areas where money can be made. For the very high net worth individual, one with in excess of £300,000 to invest, coloured diamonds should definitely be considered as part of a balanced portfolio.”

In fact, if you look at a website such as Fancy Diamonds, you can marvel at graphs showing the amazing rise in the prices of the pinks, reds, greens and blues over the past decade or so.

It looks such a fail-safe investment, and each stone has such an exclusive value of being unique, that I rushed to my favourite diamond dealer in Hatton Garden to seek urgent advice.

Caring for your colours

David (not his real name, for security purposes) said, “Of course the investment opportunities look immense, but the colour makes things complicated and you have to be certain of what you are buying.

“It is totally different from cutting white stones. It’s all about the hue and how to shape it. The blue diamonds contain boron, the yellows contain nitrogen, and all this calls for extreme care in the cutting. So you have to buy from an expert.

“That said, a red diamond still holds the record price achieved: $1m a carat.”

To stay on the pricing, there is a ‘bright pink’ stone within the strongrooms of Hatton Garden for which the agent has been offered $19 million (that’s $2m per carat). He’s holding out for $23m.

And it’s rumoured that the president of Russia, Vladimir Putin, wanted to view a similar stone recently. By the time the stone had been from the owner, through Geneva, the various valuing agencies, lawyers and the gemstone equivalent of Uncle Tom Cobley, it cost the poor man $50,000 just to view it. I hope Lyudmila is worth it.

Are they a good investment?

David continues: “Sure, if you’d invested in the S&P 500 (the benchmark US stock index) for the past ten years, stones would have beaten it tenfold. But diamonds aren’t a commodity which is traded every second of the day.

“In the stock market you can get a fairly good idea of the value of your investment through the normal valuation methods. These coloured stones are trophy pieces and the best barometer is the auction room.

“If it’s a ‘strong’ room, with lots of bidders, then good luck. But that wasn’t the case during the credit crunch and those who needed to sell took a big loss. The rest effectively shut up shop.”

Tray upon tray of these wonderful stones are indeed a rich sight, each of them worth a couple of houses in Kensington. The best entry level for coloured stones is as depressingly high.

As David told me, “If you want to make real money, then don’t go for less than $300,000 a carat. But my real advice is don’t do it as an investment. Buy whatever you buy because you love it.”

Blacklock agrees, saying: “We’ll soon be launching a section of our website catering for the sale of these exceptional diamonds. In the meantime we’re focusing on creating fine jewellery with beautiful stones that the wearer can enjoy and pass on to future generations.”

Ah, I thought, as I joined the others trudging home through Hatton Garden on their way to Chancery Lane tube: it’s all , in the end, about romancing the stone.

If you are interested in diamonds that could provide returns, see Blacklock jewellery’s diamond brokerage page. Blacklock is offering specialist consultations to high50 members. Phone Chris Blacklock on 020 3086 8778 or email chris@blacklockjewellery.com and quote high50