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Quantumrock has recently issued an investment certificate with promises of returns from the transformation of rough stones into polished gemstones. Indeed, the Luxembourg-domiciled investment structure, called "Rough Gemstone I", provides an opportunity to invest in the process of polishing gemstones, without the usual expenses and risks associated with acquiring unpolished stones. It is the firm's first hard-asset product, and the certificate is due to be listed on the Luxembourg Stock Exchange shortly. It aims to achieve returns of 49% to 106% net for investors in less than 24 months. "The target return may initially seem quite high, and it is definitely healthy" explains Stefan Tittel, CEO and founder, to Opalesque. "However, when comparedto a traditional private equity construct, the target return of Rough Gemstone I ranges well within the average performance of a well-performing PE fund. The return target results from the multiples typically observed in the gemstone industry when converting rough stones to polished gemstones and selling the product at wholesale prices." Stefan Tittel is one of the speakers at the upcoming Opalesque Small Managers - BIG ALPHA webinar on Wednesday, Nov. 8th 2023 at 11 am ET (details below). 
Green gems With $125m in AuM, it is already three-quarters of the way to its target of $175m. Qualified investors can invest a minimum of $125,000. The seed investment of $125m consists of 43 kg of alexandrite and 78 kg of emerald, all in rough state. Often described by gem aficionados as "emeraldby day, ruby by night," alexandrite is the very rare colour-change variety of the mineral chrysoberyl. Originally discovered in Russia's Ural Mountains in the 1830s, it's now found in Sri Lanka, East Africa, and Brazil, but fine material is exceptionally rare and valuable. Emerald is the bluish-green to green variety of beryl, a mineral species that includes aquamarine. Colombia is by far the world's largest producer of emeralds and Zambia is second. The gemstone market has experienced steady growth in recent years thanks to increasing demand for luxury goods around the world. It is estimated at $32bn in 2023, according to Future Market Insights, a research firm, and it is likely to reach almost $56bn by 2033. The market is expected to exhibit a CAGR of 5.6% within these 10 years. The gemstone market holds 50% of the share in the overall gems and jewellery market. The allure of gemstones Quantumrock has identified a compelling niche within hard assets. And there aren't any institutional grade or professional investment grade offers for such an attractive asset class yet. "That's why we set off with this private equity-type approach of taking rough gemstones, which we have acquired through a partner, and investing in the polishing process," says Tittel. "With all of the know-how that we've already amassed over the years and the strong partnerswe have identified for this product, including our advisory board, we have built a construct that makes this asset class investable for professional investors for the first time." One of the first steps in creating the product was to identify a suitable source of rough stones and avoid the common problems that stem fromthe gemstone market, such as fakes and blood diamonds. Sourcing is the main risk and the firm has made sure the stones come from clean sources, that is, government-overseen mines in Brazil. The stones were appraised by independent gemmologists and vetted by BDO, a large advisory firm. Now that the firm has found the partners andhas sourced the stones, all that's left to do is the polishing of the stones. The remaining $50m to be raised will finance that. Gemstone value creation process 
Rough Gemstone I focuses on selling polished gemstones to wholesalers to ensure predictability and timely liquidation of the entire stock. The market is eager for this As far as hard assets are concerned, rough gemstones are higher on the exotic quality spectrum. "There are many ETCs by now on other commodities or hard assets, physical assets like gold, platinum and so on," says Tittel. "And they haven't been around for a long time. With the changes in the market regime, investors are increasingly looking for promising opportunities in such hard asset classes. So, we feel like the market is eager for Rough Gemstone I." | ||||
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Horizons: Family Office & Investor Magazine
Gemstone Certificate launches on Luxembourg Stock Exchange |
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