Will Diamonds Be Forever With This ETF? (EZA, CNDA, GLD)
IndexIQ, the New York-based ETF issuer known primarily for its hedge fund replication and small-cap ETFs, has filed plans with the Securities and Exchange Commission to launch an ETF backed physical holdings of diamonds. The IndexIQ Physical Diamond Trust would be the first exchange-traded product to be backed by physical holdings of the precious gems.
IndexIQ's filling noted the diamonds held by the trust would be vaulted in Antwerp, Belgium. No ticker or expense ratio were specified in the filing.
While a release date for the IndexIQ Physical Diamond Trust doesn't appear imminent, the mere thought of such a fund underscores the popularity of precious metals ETFs backed by physical holdings. The SPDR Gold Shares (NYSE: GLD) is the world's second-largest ETF by assets, with $70.9 billion in AUM and the iShares Silver Trust (NYSE: SLV) has over $10.4 billion in AUM.
According to the filing, the fund will hold "one carat, gem quality, diamonds of readily available, industry-standard diamonds in common use among diamond dealers."
For now, the only ways investors can play diamond mining as an investment theme is through country-specific ETFs such as the iShares MSCI South Africa Index Fund (NYSE: EZA) and the various ETFs that track Australia, Canada and Russia that feature large allocations to materials stocks.
Some of IndexIQ's more popular ETFs include the IndexIQ Canada Small Cap ETF (NYSE: CNDA) and the IndexIQ CPI Inflation Hedge ETF (NYSE: CPI). The firm had nine ETFs with $230 million in AUM as of the end of February, according to data from the ETF industry association.
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