Barguirdjian: Diamonds Becoming a Part of the Ultra Rich's Investment Portfolio
Diamonds may be considered a girl's best friend, but now more and more of the ultra wealthy are adding the dazzling bling to their investment portfolios.
With the prices of high quality diamonds soaring and demand from China as well a the United States fueling the price surge, companies like luxury jeweler Graff Diamonds are filling orders for Wall Street. I caught up with Henri Barguirdjian, CEO of Graff Holdings on this trend and who exactly is buying in.
LL: The price of high quality diamonds has been hot. Has Graff been able to increase its inventory to capture the demand?
HB: I wish we were. Its not because we don't have the cash flow its because there are no diamonds. Its not something you can order or manufacture as you wish. The problem with diamonds is you rely on what Mother Nature gives you and at the moment she is not giving me enough. That's what is pushing the prices up so crazy because the demand is so strong at the moment for these types of stones.
LL: Is the demand intensifying?
HB: Is clearly intensifying a great deal. From the Far East and everywhere else as well. Particularly in America. The affluent client understands the value of the investment in fine diamonds and they are pushing the demand for diamonds even higher.
LL: You recently mentioned to me you are seeing an interesting trend developing on Wall Street where diamonds are now be considered an investment. Can you please explain?
HB: This is something that has never happened before. We are being approached by money managers of very wealthy clients, or the wealthy clients themselves who are all considering investing a small percentage of their portfolio in diamonds. This is something we have never seen in the past. These people never considered diamonds as an investment.
They considered them as something very beautiful and nice to own, it made their wife happy and its gorgeous to look at but they always neglected the financial aspect of the transaction. And now when they see what has happened with the price of diamonds and they realize it is not so much a silly idea. This is why financial institutions are seriously studying the diamond market. We have been getting lots of calls by people who are doing reports on this and they want charts and price history so they can formulate their research.
LL: What kind of price range are these investors looking at?
HB: You are talking about people in the Forbes 400 and they all invest $50-100 million in diamonds which is a small percentage of their net worth but in our business 50 to 100 million dollars is a very large transaction. These transactions are enough to push up the price of diamonds up very, very high.
LL: Are they rough stones or finished?
LL: Who on Wall Street is buying? Is it the JP Morgan's of the world?
HB: Its not the JPMorgan's who are investing in diamonds. Its the private investment companies, investment bankers and private equity firms.
LL: China has always been a big buyer of diamonds. What trends are you seeing coming out of there?
HB: Asian people by culture for the longest time always considered investing in jewelry as a saving for a rainy day. They continue to buy. They only want the finest. They understand now they have the affluence to buy.
LL: Going back to the American buyer are you seeing larger diamond transactions during this economic time?
HB: Since the 2008 meltdown, our business has changed tremendously. We are above the 2007 level of business which was the benchmark. It is completely changing the size of the transaction which has increased greatly.
A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."
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