Insight

Diamonds: Investor friendly?

Does diamond return index provide superior risk-adjusted returns? Researchers find out

With investors using alternative asset classes to generate a high risk-adjusted portfolio return, many off-beat assets have gained popularity. A study by Kenneth Small, Jeff Smith and Erika Small analyses diamonds as investable asset. While high correlations among asset classes reduce diversification opportunities, they conclude that a diamond return index provides superior risk-adjusted returns. From 2002-2011, an index of one-carat fine diamond prices exhibited a holding period return of 39.75%, a return greater than the S&P 500’s for the same period.