CASH FOR CANVAS.(The Talk of the Town)

In 1904, Andre Level, a French financier, persuaded twelve other investors to contribute two hundred and twelve francs apiece to a new investment fund called La Peau de l'Ours ("the skin of the bear"), which was targeted at an unusual market: modern art. Over the next ten years, the fund bought more than a hundred paintings and drawings, including major works by Picasso and Matisse, before selling off its entire collection in a giant auction, at the Hotel Drouot, in Paris, on March 2, 1914. The sale was more lucrative than even Level could have hoped: some paintings went for ten times the original price. When it was over, the partners found that they had quadrupled their initial investments.

It took ninety years, but their idea has hit the mainstream. A dozen art-only investment funds are now trying to raise money from investors looking to cash in on the art market's current boom. Last year, Picasso's "Boy with a Pipe," which had been sold in 1950 for thirty thousand dollars, went at auction for a hundred and four million, while a Canaletto that had fetched two hundred and eighty thousand pounds in 1973 sold for more than eleven million pounds three decades later. Next to such numbers, those shares of Wal-Mart that haven't budged in five years start to look pretty dull.

Art investment funds represent something of a revolution in the relationship between art and commerce. Art collecting has traditionally been the domain of wealthy individuals in search of rewards beyond the purely financial. (The economist John Picard Stein once quixotically tried to quantify these intangible rewards, deciding that they were equivalent to a return on investment of 1.6 per cent a year.) The new funds, by contrast, allow people with smaller bankrolls to play the art market by pooling their resources, and the only benefits are economic, since investors don't get to hang the paintings on their walls. In this scheme, art is just another "alternative asset class," like gold or wheat.

The new vogue for art investing has got a boost from a number of recent studies of the global art market's profitability. The Belgian economists Nathalie Buelens and Victor Ginsburgh looked at the prices of paintings between 1700 and 1961, and found that for long stretches of time certain schools of art were a better investment than bonds. More strikingly, Jiangping Mei and Michael Moses, economists at N.Y.U., examined the records of paintings with a previous auction history which Christie's and Sotheby's had sold since 1950 and used the data to put together the Mei Moses Fine Art Index. Over the past hundred and thirty years, the paintings in that index have outperformed bonds by a wide margin, and over the past fifty years they've performed about as well as stocks, too.

So should we all dump our ...