A New ETF for Diamonds and Gems | ETF Trends

FactorShares, which was acquired by GenCap Ventures in July, helped launch the PureFunds suite of mining exchange traded funds recently, including the first fund to focus on diamond producers and another on small-cap silver miners.

According to the prospectus filing, the PureFunds suite will include three miner ETFs.

The PureFunds ISE Diamond/Gemstone ETF (NYSEArca: GEMS) will follow the performance of the ISE Diamond/Gemstone Index, which includes the largest and most liquid companies that produce, explore and sell gemstones. The underlying index has 23 components, including 20 foreign companies, and the three largest were Signet Jewelers Ltd., Cho Tai Fook Jewellery Group Ltd. and BHP Billiton Ltd, with the largest coming in at 8.7% of the overall portfolio. GEMS has a 0.69% expense ratio.

“Diamonds and other gemstones have traditionally been a difficult asset to invest in because there is no spot or futures market, so we developed an ETF that exclusively invests in companies that produce, refine, sell, or hold gemstone inventory,” Paul Zimnisky, CEO of PureFunds, said in a press release. “We believe new demand for diamonds and other gemstones will continue to come from developing parts of the world where the trend of gifting gemstones is catching on fast.  Investors are also driving demand, as gemstones are being bought as a hedge against inflation, the same way precious metals are.”

There are currently no physically- or futures-backed diamond ETFs, but some companies are working on providing the market with the first ETF to track diamond prices. [Diamond ETFs in the Works — Will Investors Bite?]