Diamond Investment Fund Expected to Launch This Month

Diapason Commodities Management SA is set to launch the first publicly listed fund investing in rare white and colored diamonds on the London Stock Exchange, Reuters reported Tuesday.

According to a proposal for an initial public offering (IPO) Diamond Circle Capital shares, expected to be held June 24, the closed-end fund will invest in high-quality polished diamonds. Wednesday will mark the end of fundraising. The fund has already raised about $100 million, according to an industry source.

"Catalysts for growth in investment demand are in place for large high-quality diamonds, underpinned by the rising number of high net-worth individuals, especially in the Middle East, Southeast Asia and the Russian Federation," the prospectus said, adding that a shrinking mineral reserve base meant that rough supply will continue to tighten, a scenario that could ensure the fund will grow substantially long term.

In June 2007, Diamond Circle Capital announced that it intended to raise approximately $400 million through its IPO, and that it is focusing on the high-quality segment of the market, with a $1 million per stone minimum investment. However, a month later it announced that it was delaying the IPO. Although there was no official comment from the firm, sources blamed a tepid market and a lack of understanding of the sector by investors.

In the past year high quality and large diamonds achieved record prices in auctions by Christie’s and Sotheby’s. According to the IDEX Online Polished Diamond Price Index, the price of 5 carat stones, which have the potential to be sold for upwards of $1 million, has risen 76.5 percent year-over-year from May 2007 to May 2008.