Dana Auslander, Founder & CEO, LUXUS.
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How many times have you heard “it’s an investment piece!” when buying an engagement ring or a Van Cleef necklace? How many women have asked for a Cartier Love bracelet as a “push” present, a Tiffany heart necklace for graduation or a Verdura cuff for a 50th anniversary? While these requests may be reserved for the privileged among us, they are coveted by all as timeless, cross-generational, family heirlooms that will perpetually withstand the test of time. Investing in them should be just as important as purchasing them to time stamp life milestones, right? Not so fast.
So what does jewelry have to do with the investment world? Alternative investments used to encompass hedge, venture and private equity funds; commodities (precious metals including gold); and the “OG” alternative asset, real estate. The now infamous bitcoin and other cryptocurrencies have dominated the headlines of the past decade or so and gave the alternatives industry a reputation of being innovative and tech-forward, but also risky, volatile and susceptible to fraud. Perhaps it’s time to revert to the scarcity and stability of “real assets,” the highest end of which is firmly grounded in the luxury sector?
I and my team believe that the rise of “real assets” will dominate the next macroeconomic cycle and will come in forms adjacent to real estate, which served as a hedge against inflation for decades. With interest rates rising and a post-Covid working world applying significant pressure to the real estate market, other “real assets” such as diamonds, fine art and even wine are emerging as alternatives to this traditionally stable investment sector.
Diamonds and other precious gems served as a portable store of wealth for centuries just as gold has. Like gold (and unlike real estate, art and wine), diamonds are a commodity, a natural resource and universally understood/accepted as a currency. Unlike gold, diamonds are more easily transported, are much scarcer and in most cases significantly more valuable. The reason they were never thought of as an asset class is because of their non-fungible nature, which makes diamonds impossible to “standardize,” and that is where recent innovation in the U.S. capital markets comes in.
In 2012, President Obama passed the JOBS Act which, among other things, allowed investments of under $75 million to be IPO’d more efficiently in a fully compliant manner (with SEC and FINRA oversight). President Trump expanded the JOBS Act more broadly, and startups around the U.S. began offering the retail investment communities CUSIP’d shares of buildings, paintings and bottles of wines as well as sneakers, baseball cards and sports memorabilia. There was an obvious omission in this market with respect to precious gems and jewelry, and at LUXUS, we were determined to fill it. Moreover, our strategy encompassed offering true “hard” assets that were used by merchants, traders and even refugees fleeing conflict zones to exchange for the possibility of a new life elsewhere. Diamonds truly were used as a currency not just to adorn the necks of the wealthy, but to buy essentials such as food, transportation and, yes, real property.
In 2022, the team IPO’d the first diamond (a pink Argyle diamond from Australia) for the first time in U.S. capital markets history, and have a lineup of the most valuable precious gems, including various cuts and sizes of the “perfect” diamond (aka D/IF clarity diamond, a diamond with no inclusions), fancy colored diamonds (which constitute only 3% of the polished diamond world) and rare jewelry from the 1930s and 1940s that is particularly valuable today. We’re not alone in this, especially as certain classes of diamonds become more rare and more attractive to investors.
I and my team believe that the new macrocycle returning to “real assets” will include investments in this asset class, because while it is considered “emerging” in terms of its accessibility to investors, it is anything but in terms of its longevity and tradition. Diamonds and other precious gems have been around for centuries, are mined all over the world and connect the global community in terms of their history and symbolic meaning. It is now time to consider them as viable alternative investments that represent both the beauty and resilience of “hard” assets, especially in periods of economic downturn.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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