"The biggest question which remains is whether we are going to see new classes of investors in the art market," he said. "So far, the art market is dominated by high net worth individuals and various institutes, foundations and museums. We haven't seen a really dramatic growth of institutional demand for high-end art coming from the traditional financial industry. We don't really see significant asset allocations to art from big-name asset managers, and we really don't see a lot of structured product being offered to financial markets, with art being an underused asset." Philip Hoffman, chief executive of The Fine Art Fund Group, admits he was once skeptical and critical of the art market. "Why was art of any value?" he remembers asking while working as an auditor at KPMG. "When you compared one Venetian view to another, why was one worth $20 million and the other was worth $5,000?" His perception started to change when he saw how much money the super rich were making out of a buy-and-hold strategy at the top end of the market. He would later go to work for auction house Christie's and, still later, progress to being an art buyer and launching the Fine Art Fund, the first fund of its type to invest in art as an asset class worldwide. Numerous other funds were subsequently launched, including the Chinese Fine Art Fund and Middle Eastern Fine Art Fund. The now-closed Fine Art Fund I had 34% annualized returns on assets sold. He admits that, compared with other asset classes, art deals are still rather small. "We are managing quite a substantial amount of money, $200 million in one example , but if you are talking about an oil trade, that is probably one trade for Goldman Sachs ( GS) in one minute," he said. "We are on a different scale from the rest of the financial world. Given that we are one of the largest players in the market, $100 million to $300 million, is neither here nor there." The art market itself may also be too small to accommodate large institutional investors. Hoffman recalled a discussion with the California Public Employees' Retirement System, one of the largest pension funds in the U.S. Representatives said they were intrigued by the diversification an art investment would provide. Their plan was to consider upward of $2 billion as an investment in the space. The problem, as Hoffman pointed out, is that there is an investable market at any given time of only about $10 billion. "CalPERS with $2 billion would skew the market very rapidly," he said. "But they said that any less than that wouldn't move the needle on their diversification and correlation data." Nevertheless, he holds that art, especially on its highest end, can be an investment opportunity like no other. "I bought an Old Master painting on Oct. 1, the day the catastrophe hit Lehman Brothers, for $4.75 million" he said. "I sold it one day later for $6 million ... certainly an interesting return." -- Written by Joe Mont in Boston. >To contact the writer of this article, click here: Joe Mont. >To follow the writer on Twitter, go to http://twitter.com/josephmont. >To submit a news tip, send an email to: firstname.lastname@example.org.