Stocks and stones

Diamonds, like art, are a commodity that is gaining attention as an alternative investment. Increases in the price of the rarest colorless and colored diamonds are attracting wealthy investors and structured funds as stock markets and real estate values decline.

The price of 5-carat gems with the potential to be sold at $1 million or more has risen 76.5 percent this year to May, according to http://www.idexonline.com, the Web site of the International Diamond and Jewelry Exchange.

“There’s a group of very savvy, tremendously wealthy people who have put a small portion of their fortunes aside to invest in diamonds,” said Francois Graff, managing director of London-based Graff Diamonds International. “They’ve made incredible returns.”

Five years ago, dealers were paying $70,000 per carat for colorless diamonds of 10 carats and more, said Mr. Graff.

“Now we’re paying over $200,000 per carat,” he said.

There are only about 200 highest-grade, D-flawless colorless diamonds of more than 5 carats discovered per year, according to Raymond Sancroft-Baker, Christie’s International’s European director of jewelry. The annual yield of large blue and pink stones is considerably smaller.

“Diamonds are getting rarer. The earth just isn’t giving them up,” said Mr. Sancroft-Baker in a telephone interview.

The commodity asset-management firm Diapason Commodities Management SA listed a specialist investment fund, Diamond Circle Capital Plc, on the London Stock Exchange on June 25. Diapason did not immediately respond to e-mailed requests for comment.

Diamond Circle Capital is the first publicly listed fund to invest in rare colored and colorless diamonds, according to International Diamond and Jewelry Exchange’s Web Site.

The fund, which in June 2007 was due to have a $400 million start-up, raised $74.32 million through its initial public offering, said the Web site.

“Over the last 12 months, the best pink and blue diamonds have increased in price between 75 and 100 percent,” said the New York diamond dealer Alan Bronstein.

Mr. Bronstein’s Aurora Collection of 296 colored diamonds is currently on loan to the Natural History Museum in London.

“These are some of the rarest and most colorful things in the world,” said Mr. Bronstein, whose diamonds are specimen examples of less than 3 carats.

“They used to be viewed as curiosities,” said Joanna Hardy, senior specialist at Sotheby’s jewelry department in London. “Now buyers are taking colored diamonds much more seriously. People want to have something different. And they value rarity.”

In May, the Codium Fund, specializing in investing in colored diamonds of at least 1 carat, was to be launched in the Netherlands Antilles with a target investment of $100 million, Arab Times said on its Web site.

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