The first publicly listed fund investing in rare white and coloured diamonds is close to launching on the London Stock Exchange, Reuters reported, quoting sources in the industry.

The development underscores how precious stones, as well as precious metals such as gold, have attracted strong interest from investors looking to preserve as well as grow their wealth.

The closed-end fund, Diamond Circle Capital, 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 24 June, that was obtained by the news service. The fund is to be advised by Diapason Commodities Management.

Fund-raising will close today and one industry source said institutional investors had raised nearly $100 million.

"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.

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.

Diapason Commodities Management declined to comment. Placing agent UBS Investment Bank also could not be reached for comment.

The recent semi-annual sales of diamonds and jewellery at Sotheby's and Christie's auction houses in Geneva achieved all-time high prices, and several senior trade figures believe that the near-term outlook for rare stones is buoyant.