EXCLUSIVE-First publicly listed diamond fund to launch

By David Brough and Pratima Desai

LONDON (Reuters) - The first publicly listed fund investing in rare white and coloured diamonds is close to launching on the London Stock Exchange, fund and market sources said on Tuesday.

The closed-end fund will invest in the high-quality segment of the physical polished diamond market, according to a prospectus for the initial public share offer, expected to take place on June 24, obtained by Reuters.

Fund-raising will close on Wednesday and one industry source said institutional investors had raised nearly $100 million (50 million pounds).

"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," said the prospectus for investment company Diamond Circle Capital plc.

The prospectus said a steadily declining mineral reserve base, compounded by limited exploration success, suggested tight supplies would continue, which industry analysts say could mean long-term growth for the fund.

"It is the first listed polished diamond fund," said Jamie Strauss, managing director, UK equity products, of BMO Capital Markets (Bank of Montreal), who closely tracks diamond markets.

"It will be invested in white and coloured diamonds. It will become one of the world's finest diamond collections."

Diamond Circle Capital's investment advisers, Diapason Commodities Management SA, declined to comment. Placing agent UBS Investment Bank also could not be reached for comment.