Hedge Fund Shuns Gold, Oil For Diamonds

May 26 2011 | 10:49am ET

Lots of hedge funds are high on gold, and many others can't get enough silver. But only one, as far as we know, has chosen a girl's best friend as its chief inflation hedge.

Covenant Financial Services said this week that it has poured some of its $275 million in assets into building a portfolio of "large, rare and highly-sought-after" diamonds. The Oklahoma City-based firm has been buying the precious stones since November instead of gold or oil.

"One of the trends we are seeing now is an enormous multi-generational transfer of wealth take place from the West to the East, and moving a small portion of our capital into diamonds is one of the ways we are profiting from this," Steve Shafer, chief investment officer, said. And that transfer is taking place at just 50 cents to 60 cents on the dollar.

Covenant plans to hold the stones for between one and three years.

Diamonds and other gems currently make up less than 5% of Covenant's assets.

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Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…