The market for extremely high end, exceptionally rare investment diamonds is expected to be largely impervious to the coronavirus pandemic, iSparkle’s founder and CEO Ilan Kaplan tells Jewellery Outlook Editor David Brough.
iSparkle is a fast-growing Johannesburg-based maverick diamond manufacturer, a nimble operation with a network of worldwide clients including jewellery houses and the biggest diamond dealers in New York and Hong Kong secured since its launch in August 2018.
Q. How will the coronavirus pandemic affect the market for rare and exquisite investment diamonds?
Ilan Kaplan: I do not believe that the market for rare and exquisite investment diamonds will be affected at all as a result of the current coronavirus pandemic. While there might be a temporary liquidity squeeze in these markets, I do not foresee these prices coming down at all. I think it’s also important how we define “exquisite investment diamonds”. For me, the definition would be expensive, super rare, top end coloured diamonds.
By virtue of the fact that these natural resources are so rare and so sought after, the value would be immune to short-medium term ripples in the world financial markets.
The value of these items is not determined by simple economic supply/demand fundamentals but rather by the inherent value of such a rare natural resource.
Just think back to the Wittelsbach Blue diamond, which in December 2008, when the world was in the midst of a financial crisis, sold for $24.3 million, at the time the highest price ever paid for a diamond.
The sale of this 35.56 carat fancy deep grayish blue VS2 diamond, with its combination of rarity and royal provenance, made headlines round the world.
Q. What impact will the recent big cuts in interest rates, the slide in stock markets and the surge in the gold price have on demand for rare diamonds?
Ilan Kaplan: I see the current macro-economic conditions being a huge support for the demand for rare and exquisite investment diamonds.
Substantial amounts of cash have been freed up by the significant liquidation of equities and other tradeable assets around the world.
Interest rates are being taken to zero or close to zero in most of the developed world and the only seemingly safe asset class presenting itself at the moment is the US Dollar, but with yields close to zero.
Enter a US Dollar denominated asset class which has performed very well over time and is immune to most financial market fluctuations – rare and exquisite investment diamonds.
It is imperative that potential investors understand three crucial points.
Firstly, that purchasing these items from reputable sources is of the utmost importance.
Secondly, investors must feel that they are getting the fair and correct market prices for them.
And thirdly, it is also crucial that investors understand the bid/ask spread when it comes to making such an investment.
This would be defined as the difference between the purchase price and the inherent value of the diamond, the difference being the supplier’s mark-up.
It is therefore vital to understand that such an investment would be for the long term.
At iSparkle, we are very well positioned to take care of our clients in this regard. As well as trading in the wholesale diamond market, iSparkle also looks after high net worth individuals and asset managers who are looking for alternative asset classes.
We bring both diamond and financial market knowledge and experience to the table and are therefore perfectly equipped to advise clients as to the best investment diamond for their particular needs.
Most of our diamonds come straight from the source, are cut and polished by us and transferred on to our clients with minimum difference between the client’s purchase price and the inherent value of the diamond.
We hold our clients’ hands (after much hand-sanitizing!) and advise them in making the best long-term investment decision when purchasing high value, exquisite diamonds.
Q. Which types of investment diamonds will be the most resilient?
Ilan Kaplan: Most of the world’s diamonds would not qualify to be defined as investment diamonds. Most diamonds are a store of wealth which demonstrate very little capital growth over time.
When purchasing a diamond for investment purposes, it is crucial to receive the correct advice from a trusted source so that the asset purchased will not only store wealth but so that this wealth will grow over the lifetime of the investment.
The most resilient investment diamonds over time have proven to be super rare, top end coloured diamonds.
Even within this category, it would be prudent to match the correct item with the individual investment requirement.
Investors have different budgets and different requirements as far as duration of the investment is concerned.
Just last week we looked after a high net worth family who were looking to invest in a rare diamond and we suggested to them a rare pink stone.
Q. What will be the impact on the market for investment diamonds of the cancellation of trade fairs and risks that physical high-value auction gatherings may be cancelled too? Will trade in top tier diamonds shift increasingly online?
Ilan Kaplan: I believe that the market for high end investment diamonds is made through relationships between investor and supplier.
The general wholesale diamond trade will need to adapt to a new normal in this fast-changing world.
There will definitely be more trade online as most of these items have been standardised and commoditised with prices being determined by supply and demand.
When it comes to expensive investment grade diamonds, it is difficult to imagine an extensive investment being made without seeing the actual item.
Plans can be made to send the diamonds over to the client for inspection prior to the investment decision being taken. I don’t see the actual trading in the top tier items going online but rather I believe relationships will be managed less face-to-face and more online.
iSparkle sources rough diamonds in Africa, cuts and polishes them and sells them to the leading players in the diamond wholesale markets. iSparkle specialises in diamonds which are 3 carats plus, and in yellow, pink and blue diamonds. The company is committed to savvy sourcing and competitive pricing, while outsourcing manufacturing to the best factories for any particular diamond.
iSparkle’s founder and CEO Ilan Kaplan is a chartered financial analyst (CFA) who is rooted in the African diamond industry and a former chairman of the South African Diamond Manufacturers Association.
He is one of the world’s most well-qualified experts in large natural diamonds, because he spent over a decade running the South African operations of one the world’s most successful and high-profile diamond manufacturing companies.