Diamond investments are being made more accessible with the launch of the Diamond Standard Fund for accredited investors, IRAs and retirement funds, Diamond Standard and Horizon Kinetics announced earlier this month.

The fund, launched on May 2, is based on blockchain technology and offers diamonds as commodities structured as coins and bars, which brings standardized pricing and trading to the previously fragmented diamond market, Diamond Standard said.

“Investors used to think diamond investments were a bad idea. This changes that perception,” Diamond Standard CEO Cormac Kinney said in an interview. “In the past, diamond prices were stable compared to gold, which increased in value, but enabling more investments will increase diamond values,” he added. “Also, the supply will be limited because there are few, if any, more diamond mines that can be opened.”

Kinney said it took Diamond Standard five years to develop its diamond commodities, including two years to receive the approvals needed to trade diamonds as a commodity through the fund. Opening the market to more investors by offering the fund will increase the price, he said. Diamond Standard’s fee is a relatively expensive 2%, but, Kinney said, potential profits for investors should far outstrip that amount.

Trading diamonds as a commodity will make them available as a hedge against inflation, he said. “By managing trading and custody, the fund will enable investors to allocate diamonds conveniently through shares, making the asset accessible to IRAs and funds that cannot hold commodities directly,” Diamond Standard said.

The initial offering is capped at $500 million. Because of the prior constraints on investing in diamonds, while gold gained 500% over the last 20 years, diamonds were flat. But more recently, in the 18 months since the approval of the Diamond Standard Coin, diamond values have soared, outperforming gold by more than 40%, Diamond Standard said. Diamonds are historically uncorrelated with other investments, including gold. 

“Diamonds are an exciting store of wealth, a hedge, and a speculative asset, available at a time when investors need it most. Diamond Standard coins and bars have finally unlocked diamonds as an asset class, but most investors simply can’t hold physical commodities. The Diamond Standard Fund removes that hurdle by providing investments in shares,” Kinney said.

The fund will participate in the $75 million initial offering of the Diamond Standard Bar, a special one-time event where Diamond Standard will bid globally to buy a statistical sample of 0.76 to 2.05 carat diamonds. The co-sponsor of the Diamond Standard Fund is Horizon Diamond Advisors, a subsidiary of Horizon Kinetics.

Diamonds as a commodity “are a perfect fit for the contrarian, innovation, value and inflation protection goals of investors.” Murray Stahl, co-founder and CEO of Horizon Kinetics, said in a statement. Diamonds currently have a worldwide value of $1.2 trillion, more than all the world’s silver and platinum combined. A hard asset that can be transacted as a blockchain token, the diamond commodity will provide diversification, potential inflation protection, and a new store of wealth for institutional and individual investors, while bringing transparency and efficiency to the diamond supply chain, Stahl said.

“Diamonds are a very interesting asset. As an investment, diamonds are a hard asset that does not require someone else to run a company to turn a profit,” Kinney said. “The demand for diamonds is growing on every continent but the supply is going to dwindle increasing the value.”