Williams says the fund will focus on Impressionist, Post-Impressionist, Modern, and contemporary art and that it will deal only with artists who have substantive and verifiable track records. He adds that the fund has little interest in "finding the next ‘great' artist" and that the fund will rapidly trade the art it buys through prearranged exit strategies, often selling pieces within a few months of a purchase.

"All our trades have at least three exit opportunities attached," says Williams. "We go for the exit with the quickest and best margin of return."

Based on audited performance of the art trading done by the company privately over the last three years, Williams says the fund should make 30 percent net returns annually. Its hedge, he adds, is basically a bet against 10 to 15 securities tied to the art market that should protect investors from any catastrophic drop.

Both the quick trading and the fund's hedging may come in handy. Although art has been a good investment over certain discrete periods, Merrill Lynch research indicates that it is one of the few assets where the probability of losing money remains high even for long-term investors, while also noting that art provides "inferior returns while generating substantially more risk."

The risks to the art market seem to grow more ominous every day if the past is any judge. The art market appreciated in the mid-1980s, with Impressionists and old masters (including Peter Paul Rubens) ringing up record sales to real-estate-rich Japanese investors.

The top of that market can be timed to the 1990 sale of Vincent van Gogh's Portrait of Dr. Gachet to Japanese industrialist Ryoei Saito. The chairman of Daishowa Paper Manufacturing, Saito paid $82.5 million for the painting, then was ensnared in a bribery scandal, went broke, and died. The painting, incidentally, never resurfaced.

It could be that the portrait's current owners are still waiting to get their money out of it, as art prices followed Saito's fortunes, tumbling 36 percent in 1991 and entering a near decade-long bear market. Many of the old masters and Impressionist works that led the market failed to recover.