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ETF Invests in Diamond and Gemstone Companies


Near the end of 2012 PureFunds launched GEMS (ISE Diamond/Gemstone ETF, Expense Ratio 0.69%) which is the first entrant in the ETP space that offers exposure to “invest in the full life cycle of the gemstone industry” according to fund marketing literature.

Thus, the fund invests in companies that are involved in the life cycle of diamonds and gemstones from the initial mining to retail distribution for example, and it is important to note that this is an “equity” way to play this market (sub-category of the greater Commodity Producers space) and not a way to invest in physical diamonds.

There has been some discussion over the past several years about the potential development of a physically backed “Diamond” ETF in the media, so we believe it is important to make this distinction in terms of how GEMS is precisely designed.

The fund remains small at the moment, with about $1 million in assets under management and averaging 8,600 shares traded daily, but this is quite normal given the limited live track record and general “newness” of the fund in the marketplace.

Visual bid/ask spreads are often quite wide in the fund as well, so specific trading strategies should likely be discussed with a liquidity provider, especially in the case of larger desired allocations from institutional size accounts.

Currently, top holdings in GEMS are Chow Tai Fook Jewellery (8.67%), Petra Diamonds (7.94%), Anglo American (7.44%), Signet Jewelers Ltd. (6.86%), and Dominion Diamond Corp. (6.82%).

Of these top holdings, only SIG is listed in the U.S., with the other names are ordinary shares listed in local markets overseas. 83.70% of the portfolio is invested in internationally based names, with the remainder of the fund being parked in U.S. based companies, so another trading consideration should include the cognizance of local market hours and the dynamics of accessing liquidity in such names during U.S. market hours.

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

Street One Financial is an educational/research firm utilizing the Broker Dealer services of GWM Group Inc (RLCC) a FINRA registered Broker/Dealer. All trades are executed through GWM Group (RLCC) and cleared by Fidelity (NFS)DTC number 0226. Street One Financial LLC makes available products and services offered by GWM Group Inc., a registered broker-dealer and Member Securities Investor Protection Corporation (SIPC), Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.