Alrosa Acting to Form Investment Diamond Market

Russian diamond monopoly Alrosa is a step closer to forming a market for investing in diamonds after signing an agreement with asset management company Leader to create an infrastructure for trading in such diamonds.

The agreement, signed March 19 by Alrosa President Sergei Vybornov and Leader's CEO Anatoly Gavrilenko, calls for the formation of an investment center that will also provide banking services, diamond backed loans, diamond evaluation and certification services as well as risk insurance.

According to Interfax, specialized stock market tools, which include the option to buy shares in mutual funds backed by investment-graded diamonds, may also be instituted.

“It's an attempt to create a new class of investor, who will put money into a new product, the base for which will be Alrosa's diamond stocks,” the Russian news agency Interfax quoted Vybornov.

According to Vybornov, the companies expect a $500 million diamond investment market to emerge in the short term, while cautioning that there are regulatory problems that won't be quickly resolved.

Gavrilenko said his company has asked the Federal Financial Markets Service (FFMS) to adjust regulations to allow the formation of such a market place, adding that initially small closed funds could be set up with a limited number of investors.

Alrosa is reportedly overhauling its sales system, forming three individual divisions: sorting, customer relations, and marketing and sales. The company said this would be done “in order to eliminate conflict of interests which arise when one division is responsible for all three functions.”