Cayman-based Novel Asset Management is launching a novel investment vehicle: a rare diamond fund.
The Novel Diamond Fund I will be the first in a series of closed-end funds targeting rare diamonds. Scheduled to launch July 1, it will be open to institutional and sophisticated investors and carry a management fee “as low as 1%” with performance fees “charged only for outperformance of the diamond market, and only after all invested capital is returned to investors,” according to Alan Landau, a fund director.
“Diamonds offer a compelling investment opportunity because supplies are constrained and demand is rising,” says Landau. It takes 10 years to take a mine from discovery to production and there have been no major diamond discoveries since 2001, but demand for diamonds is growing in emerging markets. This, says Landau, increases the profit potential in the “elite diamond market” for stones worth over $1 million which the fund will target.
Novel Asset Management is backed by Novel Collection, one of the largest specialty colored diamond traders in the world. “Success in this investment strategy requires experience, and the fund is going to be managed by one of the leaders in the rare diamond market. The manager’s CIO, Eliad Cohen, and managing director, Eyal Mashiah, have decades of experience trading in rare diamonds,” said Landau, and the “Novel Collection has a track record of profitably trading in rare diamonds and we expect that the fund will be able to generate substantial returns even in a flat diamond pricing environment.”
Landau says they’ve received “very positive” feedback from investors so far.
As a closed-end fund, it is expected to return all capital to shareholders and cease operations on or before June 30, 2013.