Diamonds, an alternative investment to diversify the assets


Precious stones represent one of the best ways to diversify the assets. “In Switzerland this kind of investment is not yet so developed, but has a great potential for growth”, said Compostella (Idb Helvetia SA)

Precious stones, and diamonds in particular, represent one of the best ways to diversify investments: they are an ideal investment in the medium to long term (5-7 years or more) and an alternative to government bonds, insurances, stocks and gold, which has become dangerously speculative. But, in spite of the expectations, this kind of investment is not yet so developed in Switzerland. Lmf International asked Diego Compostella, Ceo in Idb Helvetia SA, a leading provider of services in the world of diamonds for investments, to illustrate size and potential of the Swiss market.

What is your role in this market, what do you do and who are your potential clients?
We are a middle way between a market maker and a broker: we buy directly the stones from our suppliers but we also work to help our investors in reselling the stones, acting like a broker between demand and supply. We publish our prices quarterly and make every effort to grant the necessary liquidity for the secondary market. We can proudly say that, in more than 40 years of activity, we have always helped our investors in reselling the stones.
Usually, our typical clients are medium-long term investors (due to the nature of “safe haven” of this asset), such as a families who wish to create wealth for their children.

In the world of the investment in diamonds, what are the main characteristics of the swiss market?
In the business of the investment in diamonds, we believe that Switzerland will play an important role, due to the wealth and the economic stability of this market. In the previous years, financial markets have often experienced bad performances and investors now are looking for alternative assets, in order to achieve positive returns. Switzerland is a strategic country for detaining physical mobile assets, due to the safeness of its bank safety vaults. We estimate an increase of the sales in the next years, also because we believe that in the future more investors (even not resident in Switzerland) will move their patrimony to this country, not anymore for purpose of privacy (like in the past) rather for searching more protection from the turbulence of the global economy.

When did you start in Switzerland and what is the size of the Swiss market?
We’ve started in mid 2014 in Switzerland having a very strong background in Italy and a unique business model. The Swiss market is not jet very sensitive and acknowledged on this kind of alternative investment. In Switzerland, this market is not yet so developed, also due to the closure of mentality towards this investment. Swiss financial operators (banks, trust companies and family offices) should begin to “open up” to this type of investment, because – we think – in the future, Swiss investors (and not only) will converge more and more towards this type of investment. We foresee a growing interest already in 2016, also due the expansive monetary policy of the CBE that will keep low interest rates. Growing uncertainty on the performance of many asset classes usually such as gold or real estate considered to be low risk is pushing investors and money savers to look at ways to protect safely their capital. Diamonds are very likely to be their choice in 2016. In 2015, for example, in Italy the market of the investment in diamonds exceeded EUR 200 millions, an increase of 15-20% compared to the year before. And 80% of transactions were made through DDB.

In terms of asset allocation, the precious stones is one of the best ways to diversify the assets. Which role an investment in diamonds could play? What strategy do you suggest to adopt?
It is important to understand that the investment in diamonds is not a speculative one, the goal of this investment must be to protect the patrimony. It is a medium-long term investment, it should be kept for at least 5-7 years (better 10 years and ideal 20 years), in my opinion an investor should not assign to this asset more than 10%-20% of the value of its own portfolio.
The best approach to this asset consists not in investing in one unique stone, but in splitting the amount in smaller stones (we advise between 0,50ct and 1,00ct) so that it will be easier to disinvest and it will be possible also to do partial disinvestments during the life of the investment.

What are the benefits for the customer who decides to make an investment in diamonds? In addition, there are tax benefits?
First of all, we must always remember that an investment in diamonds is an investment in physical goods, in other words the investor does not receive just a paper (such as a share or a bond), but a real diamond with an incorporated value, tradable all around the world, with an appropriate certification, that we always deliver to the investor with the stones.
Secondly, it is statistically proved that the prices have not ever been influenced from political events, currency fluctuations or market volatility and this confirm the nature of “safe haven” for this asset.
Finally, VAT is the only tax related to the purchase of this good. Here in Switzerland it is due also the tax on property (tax on “substance”), but the percentages are very low. If the investor decides to store the stones in our safety vaults within a freeport, the VAT is not due.