If you've got the money and the inclination to try something new and exciting, consider art as an investment. Art experts believe that this will be the next big asset class.

For years, art has been an elitist object and out of reach for a larger part of the investing class. But that, says Neville Tuli, Osian's chairman, is set to change. "Over the next few years, we will see a large interest in art coming from not only the elite class but also the middle class," he says.

And to make this possible, the art fraternity is taking several initiatives, the latest being the launch of an art fund by Osian's Wealth Management Services. Last year, Edelweiss Securities launched India's first art mutual fund that was managed by Geeta Mehra of Sakshi Art Gallery.

Although these funds have a minimum ticket size of Rs 10 lakh (Rs 1 million), Tuli says that this is only the first step.

"Basically the intention of this fund is that over the next 3-4 years, we will be able to create a mutual fund industry, bring in the middle classes, 300 to 400 million Indians to take a stake in the cultural heritage of our country," he said in an interview with CNBC TV 18.

As for returns, Tuli says, "If one's opportunity cost in the market today would be 20-25%, obviously one cannot guarantee anything and that is not in any way the intention but I would be disappointed if any art fund that knows its subject well, earns less that 30-35% per annum tax free for its clients."

Direct investment vs. investing through a fund

Lord Meghnad Desai, Director Osian's and Member of House of Lords, UK, told Moneycontrol, "Knowledge is very important while investing in art. If you are buying art directly, go with enough knowledge."

And what is the kind of knowledge that you would need to invest in art? Tuli told Moneycontrol that it is important to invest only in those art pieces that have been historically proven. "By that I mean works of those artists who have given anywhere between 25-50 years to the business of art," he says.

It is difficult for a lay investor to have perfect knowledge of this and hence investing through a fund provides expertise to your investment as compared to direct investment in art.

Moreover, investing directly in art is an expensive business. Tuli says that if an individual goes out and buys a piece of art, he will have to pay 15-20% commission when he buys. If he is not registered with VAT, he loses 12.5% VAT when he sells with a registered dealer.

When he sells he will have to pay another 15-20% commission. Then if he sells within a 3-year period, he will have to pay 33.8% short- term capital gains. If he sells after 3 years, he would have to pay 20% long term capital gains tax. That means he has to make 65-70% before he makes his first one percent. As against that, a fund will charge you a management fee of just 3% every year.

Features of the fund

Structure	The Osian's Art Fund is a private trust under the Indian Trusts Act, 1882. Osian's � Connoisseurs of Art shall act as both Sponsor and Asset Management Company for the Osian's Art Fund.
Objective	To generate significant medium and long-term income and capital growth from a cohesive, historically driven portfolio of investment and management in contemporary fine arts from the Indian sub-continent.
Chief Advisor	Mr. Neville Tuli
External Auditors to AMC	AF Ferguson and Co
Legal Advisors	Amarchand & Mangaldas & Suresh A. Shroff & Co
External Auditors to the Fund	Deloitte Haskins & Sells
Scheme	Contemporary 1
Purchase Unit/ Minimum Investment	INR 100 per unit/ INR 10 lakh
Initial Offer Period	One month starting 7th June 2006
Type/ Lock-in period	Close ended with a lock-in period of 36 month
Liquidity	The units can be transferred at the end of any month subject to approval by Trustee
Expenses and Returns	Management fee of 3% per annum with a hurdle rate set at 15%. This means, the first 15% of profit will go to the investor. Any return over and above that will be shared between the investor and the fund in the ratio of 70% to 30% respectively.

Is it safe?

Art funds of any nature are not governed by any law or regulation in India. Presently, there are no laws or regulations governing the operations of the scheme and investment in the art market in India.

Therefore, do your homework. Find out about the fund's background and invest only in reputed funds.

What is the benchmark to track performance?

Like the benchmark for tracking stock market performance is the BSE Sensitive Index Sensex, a

similar benchmark has been devised recently to track performance of art.

The Economic Times, in partnership with Osian's Connoisseur of Art has constructed the Art index. The index comprises of top 51 contemporary Indian artists and will track the prices globally for such artists.

Should you invest?

Certified financial planner Gaurav Mashruwala suggests, "I would not really recommend art as an active part of your portfolio, the main reason being that there is no track record of performance. Having said that, if you still want to invest in art, I would suggest that do so only if you have enough surplus left after you fulfill all your current and future financial responsibilities. Valuations are an issue in case of art investments as the market is still immature."

Lord Desai adds, "I would suggest that you invest in art after you have completed making all your other investments. Art today is an illiquid asset because it is not easy to find buyers. Of course over the years this will change, but till then one must exercise caution."

So the lesson is clear: invest in art to add a dash of color to your portfolio, that too with money that you won't need.