Diamonds That Deliver Dividends

White Paper; By: Jill Newman for LUXUS

Why diamonds are fast becoming the most valuable alternative asset.

What’s worth $70 million and fits comfortably in your pocket? An exceptional fancy pink diamond, of course.

In 2017, Asia’s Chow Tai Fook jewelry group shattered every known record for a jewel sold at auction when it paid $71.2 million for the legendary Pink Star at a Sotheby’s Hong Kong sale. Like a great work of art, the 59.60-carat fancy vivid pink diamond is one of a kind; auction experts say there won’t ever be another like it.

Over the past decade, the value of such “blue-chip” stones—top-quality D-flawless and fancy-colored diamonds— has significantly outpaced the S&P 500 in rate of return. For example, if you purchased a fancy vivid pink diamond a decade ago, your investment would have increased in value today by 116 percent, according to the Fancy Color Research Foundation (FCRF). And it’s not only pink diamonds that are paying dividends: All top-quality fancy-colored diamonds—including yellow and blue diamonds—have skyrocketed in value.

Those soaring diamond prices have caught the attention of investors who are looking for creative places to stash their cash with promising returns.

With today’s global economic uncertainty, volatile stock markets, and slowing real estate values, the wealthy are increasingly turning to alternative hard assets such as collectible automobiles, art, fine wine, and diamonds to diversify their portfolios.

In times of turmoil, diamonds have historically been an especially reliable form of transportable currency, no matter the country of the investor. “You cannot carry a painting around with you, and you can’t move a building—a diamond is the only way you can move $100 million in your pocket,” explains a Christie’s executive.

The rise in the current number of billionaires is also driving investment in blue-chip diamonds. “It’s a thin market and only the very wealthy can afford to buy these diamonds,” explains Paul Zimnisky, a leading diamond analyst. Zimnisky says a significant segment of buyers has turned to acquiring rare diamonds over $1 million—and often in the tens of millions—as an inflation hedge. “These investors are generally buying diamonds to store away strictly as an investment.”

But have blue-chip diamond prices peaked—or is there room for growth? The fact is top-quality diamonds are scarce. Only one in every 100,000 diamonds mined are graded a fancy color, and an even smaller percentage is classified as top-quality or vivid color.

When it comes to pink diamonds, the world’s main source, the Argyle mine in Australia, was depleted and permanently shuttered in 2020. For nearly 40 years, it delivered 90 percent of the world’s pink-hued diamonds, yet the total number is so few that all of them together could easily fit in the palm of your hand. Today, those pinks remain among the most elusive of precious stones, along with high-quality yellow and blue diamonds.

In comparison to other collectible hard assets—such as automobiles, watches, and fine wines—diamonds have the advantage of being indestructible. They don’t require maintenance, proper storage, or even a tune-up, which means you can stash them away in a safety deposit box for decades without a care.

Further bolstering the diamond’s investment appeal is its universal verifiability. Third-party sources such as the Gemological Institute of America (GIA) can scientifically assess and award diamond certificates to ensure a global level of confidence in investment. Thus, buyers know exactly what they are getting, whether they are in Dubai or Dallas.

Recent headline-making sales have made more potential investors aware of diamonds as an asset, but says Zimnisky, a large portion of the trading action never sees the well-publicized auction market. “When it comes to large diamonds and good quality fancy-colored diamonds, it’s a very secretive market,” he says. “The transaction costs at auctions are relatively high so a lot of the sales are private.” That means despite the slim supply of stones, the market is active—and there are profits to be had.

But nothing beats the excitement of a rare diamond when it hits auction. Next on the block is the Fortune Pink, an 18.1-carat pear-shaped fancy vivid pink diamond offered by Christie’s in Geneva on November 8. Its estimate is $25 million to $35 million, but it will likely command more due to its auspicious weight: the number 18.18 signifies definite prosperity in some Asian cultures. And if its name is any indication, you can expect diamonds as an investment to continue to rise.

What Gets Top Dollar at Auction: The 10 Most Expensive Diamonds Ever Sold

1. The Pink Star, a 59.60-carat fancy vivid pink internally flawless diamond: $71.2 million, Sotheby’s Hong Kong, April 2017
2. The Oppenheimer Blue, a 14.62-carat fancy vivid blue diamond, the largest of its type to ever come to market: $57.5 million, Christie’s Geneva, May 2016
3. A pair of earrings with two pear-shaped diamonds—a 14.54-carat fancy vivid blue diamond and a 16-carat fancy intense pink: $57.4 million, Sotheby’s Geneva, May 2017
4. The Winston Pink Legacy, a 19-carat vivid pink diamond: $50.7 million, Christie’s Geneva, November 2018
5. The Blue Moon of Josephine, a 12.03-carat internally flawless fancy vivid blue diamond: $48.4 million, Sotheby’s Geneva, November 2015
6. The Graff Pink, a 24.78-carat fancy intense pink diamond: $46.1 million, Sotheby’s Geneva, November 2010
7. The Princie Diamond, a 34.65-carat fancy intense pink diamond: $39.3 million, Christie’s New York, April 2013
8. The Orange, a 14.82-carat pear-shaped stone: $35.5 million, Christie’s Geneva, November 2013
9. The Zoe Diamond, a 9.75-carat fancy vivid blue pear-shaped diamond: $32.6 million, Sotheby’s New York, November 2014
10. The Pink Promise, a 14.93-carat fancy vivid pink stone: $32.5 million, Christie’s Hong Kong, November 2017

Jill Newman is a contributing editor at Town & Country, Vogue, The Robb Report and is a leading jewelry and accessories editor.