London news: the City is getting serious about making money from art. Samson Spanier follows the trail of bank notes

Apollo, Jan, 2005 by Samson Spanier

Pin-stripe suits and Krug champagne are not alien to the art world, but there were nevertheless remarkably large amounts of both at art dealers Beddington & Blackman in Savile Row, one evening last month. The neo-Georgian green wails hung with Canaletto-esque views of Venice enjoyed this surfeit because many of London's financial bigwigs were discussing making money by investing in art something that we all dream about, but which is now being taken seriously for the first time.

These bankers, professors of economics and art dealers had all come from the St George's Gallery at Sotheby's, around the corner, where there had been an afternoon of talks about investing in art. It was hosted by the Fine Art Fund, a registered us Limited Partnership managed in the UK, that buys and sells art. It is pushing for clients on both sides of the Atlantic to invest in it a total of $100 million, and New Yorkers should be receiving right now invitations to a similar event in February at Christie's on 6th Avenue.

The potential gains are huge. If paintings were companies, then between 1979 and 1989 Monet's Le grand canal would have netted you a 36 per cent gain per year, or some Warhols 24 per cent between 1987 and 2001--not a rate of interest advertised at your bank. The British Rail Pension Fund is the phenomenon that everyone looks up to. It invested 40 million [pounds sterling] in fine art in 1974, and in a series of sales that culminated in 1999, the art returned an annual average of 11.3 per cent.

This is not just a matter for bankers, but a phenomenon that can change the art world. If banks and pension funds invested 1-3 per cent of their value in art as a hedging measure, which Dr Rachel Campbell of the University of Maastricht explains is sound, then the art market would receive a huge fillip.

Ten years ago, the Fine Art Fund might have been dismissed, but now bankers are serious, because the past decade has seen sustained growth in the value of top end works of art. Competition is also springing up, such as from the bank ABN AMRO. The stakes have been raised, moreover, by the change of law in Britain by which people from 2006 will be able to transfer works of art they own into their Self Invested Personal Pension Schemes. Art investment funds have one year to corner the market. This is encouraged by the emergence of companies that track the estimated 250,000 art sales per year. Robin Duthy of Art Market Research says that 'Objectivity is replacing anecdote'.

There were many puzzled and incredulous faces among the pin-stripes at Sotheby's, however. One person said, 'I do not understand why you think you can predict the art market.' He must have had in his head the crash in the 1990s, when the top-end international art market dropped 55 per cent. This was part of a boom-bust cycle initiated mainly by Japanese companies buying Impressionist and other paintings because they noticed that their country's stock market was shrinking quicker than the art market. One company bought 700 paintings in one year. Could something similar happen again?

The vagaries of value can be summed up in two comments. Philip Hoffman, Chief Executive of the Fine Art Fund, says 'A Canaletto cannot revert to zero', unlike a stock. Pierre Valentin, an art lawyer at Withers, told APOLLO that he disagreed: 'If your Canaletto turns out to be fake, it is worthless.' There is, nevertheless, a very attractive extra reason to buy into the Fine Art Fund. Hoffman explained to APOLLO how the Fund's storage and insurance costs would be met: 'Rent it out.' If you invest in oil, you cannot enjoy it; if you invest in this Fund, you can rent your favourite Durer print for a nominal sum.

For those city boys who want to collect on their own, however, it was straight down to the tower at Canary Wharf. Twelve established galleries set up smart black and grey stalls for 'Art & the City' (8-10 December). Their aim was to attract first time buyers who had the money but tend not to leave the office. Prices ranged from 2,000 [pounds sterling] to 200,000 [pounds sterling]. Dickinson had everything from a David Teniers the Younger peasant scene to contemporary works. Charles Ede offered a Roman first century AD marble torso of Dionedes, and Rosso and Rossi some Asian painted silks. Haunch of Venison showed a large panoramic photograph of a Havana street by film director Wim Wenders, as well as a Gerhard Richter abstract in burnt umber and grey of 1998. Richter was the star of the room, if the comments of one businesswoman in Dickinson gallery, presumably after many years of exposure to corporate art collections, are anything to go by. She said as she passed another Richter, in impasted grey in which blue breaks from the centre, 'It's such a relief to see some good art.'

The Turner Prize caused some unexpected celebrations when the winner was announced last month. Jeremy Deller (above), thirty-eight, won for his video documentaries of quotidian life in President Bush's home town and in Waco, the site of the cult of David Koresh. The announcement was made at a dinner at Tate, quite unlike the mad crowds at the opening view six weeks before. Deller was delighted, as were afficionados of video art in general and those who consider mainstream education toe prescriptive, since Deller at the age of sixteen was barred by his school from taking a national exam in art. But the greatest cheer was further up the River Thames, from the eighteenth-century grandeur of Somerset House, where the Courtauld Institute resides. Deller took a BA in art history there in 1988. But was this more than a matter of institutional pride? Deller was a budding artist then, and was known to give small works of art to his teachers after they took him on inspiring museum visits. The works of art are now rather valuable. Forget the Fine Art Fund; just teach at the Courtauld instead.