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Alternative Market Briefing

Diamonds are a challenging fit for the ETF structure

Monday, November 11, 2013

Beverly Chandler, Opalesque London:

The Opalesque Hard Assets Roundtable, sponsored by Stephen Silver Fine Jewelry and Eurex, discussed the suitability of ETFs for hard asset investments, specifically the potential of a diamond ETF.

Stephen Silver, Founder, S.H. Silver Company and Stephen Silver Fine Jewelry explained that the firm had looked at the concept of a diamond ETF four or five years ago. "We didn’t do it, and we didn’t even attempt to do it because at the time I believed the diamond market would have had a couple of fundamental problems launching a successful ETF" he said.

For Silver, one of the biggest challenges at the time was liquidity. "That challenge is still present today. There are too few large cap publicly traded companies within our category to create enough liquidity. I perceive this to be a big hurdle, possibly insurmountable" he said.

Beyond that, Silver felt that if you were going to construct a diamond ETF to be like a gold ETF, standardization issues are still a major hurdle. "However, there are a few patents pending that attempt to address this issue. We’ll see how that develops" he said.

Another fundamental problem, identified by Silver, with a diamond ETF is that 85% of the diamond supply ......................

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