Celebrities buy big rocks for show, but they are also betting on a predicted jump in the value of rare diamonds.
When hip-hop star Kanye West commissioned Kim Kardashian’s reported US$8 million engagement ring, he wanted an enormous rare diamond of a specific cut. His hunt for the rarest, most perfect rock was not just for show.
According to Bain & Co’s report released last year, diamonds are about to regain their sparkle. Since 2012 diamond prices have been flat, according to information provider Rapaport, raising questions over their reputation as a secure and appreciating store of wealth. But Bain forecast that between 2017 and 2023, values will rise at a compound annual rate of 5.1 percent, led by demand from China, India and the US, as the global economy and GDP growth picks up.
This is a message seconded by Nissan Perla, a 30-year gemstone veteran and the founder of wholesaler Olympic Diamond, known among Hollywood glitterati as 'The Diamond King'. From Britney Spears to Beyoncé, Kanye West and Kim Kardashian, Pharrell and Elizabeth Taylor, Perla has a star-studded client roster who demand only the best. Perla is the main supplier to famous New York-based jewellery designer Lorraine Schwartz. He sources the rocks (chiefly from Russia and South Africa, or from traders in Antwerp) and she liaises with clients and designs the pieces.
Perla says that their success comes down to sourcing only the finest gems to create the most valuable pieces. Contrary to popular belief that Hollywood celebrities wear bling for show, Perla believes they have a different motive – investment. Take American singer-producer Pharrell Williams, for example. “When Pharrell first started buying diamonds, a lot of other rappers were buying up whatever bling they could find. But Pharrell only bought the best. Today all of his diamonds are worth much more than he first paid.”
He added that when Kanye called him to discuss the stone for the engagement ring, he had done plenty of research and was highly knowledgeable. “Kanye was an expert,” said Perla. “He wanted a large cushion cut, which is a specific shape of diamond.”
And the record-breaking auction results of late actress Elizabeth Taylor’s jewellery collection says it all. The 2011 Christie’s auction in New York fetched US$115 million for 80 lots, a world record for a private collection of jewellery. Perla says he sourced many of her stones.
For the last three decades, Perla has run his wholesale business between New York and Tel Aviv, growing to 50 staff and providing diamonds for the likes of retailers Cartier, Harry Winston and Chow Tai Fook.
It was by chance that his business took a new turn five years ago. Perla’s close friend Joseph Schlussel, a survivor of the Holocaust from Hungary, passed away, leaving behind a 50-year-old diamond retail business: The Diamond Registry. This is a diamond pricing platform and retailer that also provides intelligence on the industry. At the request of Schlussel’s wife, Perla took on the business and grew it, although he refuses to provide exact numbers.
Perla is currently based in Hong Kong where he says demand is growing fast, with Asia now constituting over 50 percent of his business. High net worth individuals feel secure by buying diamonds, which act as portable stores of wealth, whatever happens in future regulations and regimes, he says.
The importance of trust and reputation in this industry cannot be over-stated. Perla says he recently sold a diamond worth nearly US$2 million to a client who contacted him online, spoke over the phone and, after seeing the diamond, wired him the money on the same day.
Investing in diamonds has been proven to pay off, but, at least in recent years, only if you buy the best. Over the last two years, global diamond prices have softened, according to Rapaport, which tracks prices of diamonds.
But for the top one percent of diamonds there have still been some eye-watering sales. In May, Swiss jeweller Harry Winston paid US$24 million for the 13.22-carat, pear-shaped flawless fancy blue diamond ring called “The Blue”, at the Christie’s Magnificent Jewels Sale in Geneva, Switzerland. In the same month at Sotheby’s, a 100-carat yellow diamond was sold for US$16 million to an anonymous female bidder.
The other way to help guarantee price appreciation is to buy colourful diamonds, say experts. Rapaport commented: “Consumers are looking for something unusual and exciting, with real value, at a time when low interest rates continue to drive the wealthy to invest in collectible, connoisseur items. In such an environment, colored diamonds surely make the grade and are likely to outperform other assets.”
“For now, the colored market remains the one bright spot of real growth in an otherwise stagnant diamond industry.”
In 2008, coloured diamond dealer Alon Garty set up the Hong Kong division of Antwerp-based distributor, Windiam. Earlier this year he launched the retail arm of the business, Van Eyck Jewellery, which sells flamboyant fine jewellery made from fancy-coloured diamonds priced between HK$300,000 (US$38,700) and HK$3 million (US$387,000).
“In the past 80 years people have been buying white diamonds, but now they want something different. They are looking for colourful diamonds which are rarer and provide better value preservation.”
Van Eyck’s creative director, Ivonna Poplanksa, designed the Diamond Jubilee brooch worn by Queen Elizabeth II in 2012. Van Eyck says it sells to other international royalty and ultra wealthy individuals, although Garty guards client names for privacy reasons. But they buy, he says, for investment purposes. The rarest diamonds are a scarce commodity and therefore likely to prove a worthy investment bet.
Garty added: “We design these pieces to be part of the owner’s heritage, an inheritance for future generations.”
Republished with permission from Wealth-X. For more information please visit www.wealthx.com