December 2012 Diamonds News | Novel Collection

FactorShares Purchased by GenCap Ventures: Big News for ETF’s

GenCap Ventures, a subsidiary of Esposito Private Equity Group recently purchased ETF provider FactorShares. Worth 15.4 million in assets, FactorShares is the very first ETF to concentrate solely on diamonds and gemstones. 

Talk of a GEMS fund has been in the air for a while and a number of issuers have been positioning to take the lead. However, FactorShares was quickest on the draw. 

The top question now becomes should you or should you not investwhat are the Pro’s and cons?



Cost is an important issue, however where physically purchasing diamonds is usually 
a very expensive prospect purchasing shares
is far more affordable for the average investor.

FactorShares ETFs are focused on mining services. Investors are in fact buying shares in the producers of diamonds and gemstones rather than the gemstones themselves.


This could change with the development of an index that arranges diamonds in a 10-layer structure of comparable quality diamonds: valued on a scale from lowest to highest values.  Chicago based company GenShares was in the process of creating a patent based on this earlier in the year. 

What FactorShares has done, is aid in the launch of PureFunds a group of mining exchange-traded funds. The group is comprised of three miner ETFs.  Of most importance to diamond enthusiasts is The Diamond/ Gemstone ETF which is set to follow the ISE Diamond/Gemstone Index which houses 20 companies: the largest of which are Cho Tai Fook Jewellery Group Ltd., BHP Billiton Ltd and Signet Jewelers Ltd.

PureFunds CEO, Paul Zimnisky commented, “We believe new demand for diamonds and other gemstones will continue to come from developing parts of the world where the trend of gifting gemstones is catching on fast.  Investors are also driving demand, as gemstones are being bought as a hedge against inflation, the same way precious metals are.”

Investing in physical diamonds has seen a rise in the past few years as a buffer against distressed fiat currencies (money that derives its value from government regulation or law). However, investors should keep in mind that jewelry manufacturers, retailers and mining outfits may not prove to been an equally effective hedge.  Should fiat currencies collapse, the liquidity of involved companies could become an issue: making the ability to secure capital a challenging prospect. 


Read more about diamond investment.


Russian Diamonds in a Bold New World 

In a bold move to combat sagging diamond prices Russia’s largest diamond producer, Alarosa sold rough diamonds worth approximately $130 million to Gokhran, Russia’s state metals and gems repository. 

The sale that took place in the second quarter of 2012 effectively removes a source of supply from the global market. WhyTo successfully acquire long-term contracts with big name retailers: Chow Tai Fook and Tiffany’s. 

Chow Tai Fook

The first of these contracts was secured with China’s leading jewelry manufacturer Chow Tai Fook.  Although slow, the Asian market has seen growth in demand led by China’s growing population of nouveau riche.  This contract provides Alarosa a foothold in China’s developing diamond market. 

Tiffany and Co.

Alarosa closed a similar deal with Laurelton Diamonds, Tiffany and Co’s Belgium subsidiary fast on the heels of the first. The contract, to provide rough diamonds to the world famous luxury retailer is for a term of three years. The value of the contract is speculated to be worth $60 million. However, neither company has disclosed an official dollar value. 

President of Alarosa, Fyodor Alexeyev stated, “Alarosa’s policy is to conclude direct, long-term contracts with big companies involved in the production without intermediaries of end-products including polished diamonds and jewelry,” adding “Signing a long term contract will allow us to put our cooperation on a constant footing and increase diamond supplies to Tiffany’s.”

Alarosa projects both polished and rough diamond sales in 2013 will achieve $4.5 billion showing no significant growth from 2012. However, the alliances formed now with Chow Tai Fook and Tiffany and Co will offer the Russian diamond giant some security in the future.  


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