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RAPAPORT... The GemShares Physical Diamond Trust, a proposed diamond exchange-traded fund (ETF), filed its preliminary prospectus with the U.S. Securities & Exchange Commission (SEC) this week. Principal executives in the firm Victor Feldman and Sharon Karsten wrote that the Trust would hold physical diamonds and the primary objective of the fund is for shares to reflect the performance of the wholesale price of diamonds included in a patented ''GemShares Global Investment Grade Standard'' (GIGS) diamond basket, less the expenses of operating the fund.
Shares in the fund are designed for investors who seek a cost effective, transparent and convenient way of making an investment similar to an outright investment in physical diamonds, according to the filing. GemShares LLC, which was formed in March 2008, is the fund's sponsor, trustee and custodian based in Chicago, Illinois.
The preliminary prospectus noted that shares would be purchased only in one or more blocks of 50,000, with each block called a ''share basket.'' The shares are expected to be listed and traded on the Nasdaq. The Trust is a common law trust under New York law.
The filing stated that the Trust would allow investors to access physical diamond markets through a traditional brokerage account. Since shares would be traded on the Nasdaq, investors are provided with an efficient means to implement various investment strategies and to be long or short in their exposure, according to the group. The Trust will acquire and sell standardized baskets of physical diamonds in connection with the creation and redemption of shares of the Trust.
All diamonds included in GIGS diamond basket must conform to specified grading standards as measured by a Gemological Institute of America (GIA) diamond grading report, and for optical standards, the Trust will employ methodologies such as the Gemex Light Performance analysis report from Gemex Systems Inc. GemShares received a U.S. patent for its GIGS identification process for investment-grade diamonds in August. (Read about the patent on Rapaport News.)
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