In Britain, railway pensioners own rare books and Monets. A glimpse at the British Rail Pension Fund's distinguished and varied art collection

The backlash from last April's American air strike on Libya made waves in unexpected places -- including London's International Ceramic Fair. Two months after the raid, the fair's organizers received a blow when concerns about terrorism caused an American foundation to cancel its plans to send Ming and Qing porcelain to the fair. The Chinese pieces (from the Koger Collection of Ira and Nancy Kuger Foundation of Florida) were supposed to form the fair's centerpiece.

But the damage done to the prestigious fair was negligable, thanks to the prompt action of the British Rail Pension Fund.

On receiving news of the cancellation, the fair's organizers, Brian and Anna Houghton, asked the trustees of the British Rail Pension Fund for a loan from their collection. The fund's trustees made 46 pieces of fine Chinese pottery and porcelain dating from the 6th to the 18th centuries available immediately. The Fair went ahead without a hitch.

The pension fund is in a unique position to help, for it has been investing in works of art for some years, and now has assembled a very distinguished and varied collection. This all began with a bold decision that the fund's trustees made in 1974, when they moved to invest up to 4 percent of the fund in works of art. That was a time of economic uncertainty and many managers of investment funds were looking for new ways of widening their portfolios. It has become common practice for a proportion of such funds to be put into real estate of all kinds. But even today no similar British institution has followed the lead of British Rail into the field of fine art.

Michael Bosworth, chairman of the pension fund, describes the early buying policy as cautious. The trustees of the collection, drawn equally from union and management, have always been conservative buyers, relying on quality and rarity, and eschewing speculation. Acting on the advice of a panel of specialists, pieces were bought mainly at auction, acquiring only the finest examples available. They put more than a third of the investment into pictures -- especially the old masters and impressionists. But they shied away from 20th-century works, with the exception of a superb ``Blue Boy'' by Picasso. The collection includes very good holdings of books, manuscripts and autograph letters, photographs, oriental and European ceramics, ethnographical and tribal art, antiquities, portrait miniatures, furniture, and silver.

Four percent of a major pension fund soon adds up to a significant sum in terms of art and 40 million were spent in the few active buying years, exerting considerable influence in the art market. The British Rail Pension Fund had a reputation in the 1970s not unlike the reputation earned by the Getty Museum of California in this decade. The fund was frequently (and often wrongly) assumed to be responsible for pushing up art prices.

The Fund's departure from normal investment practice was never without its critics. The popular press and public opinion tended to confuse British Rail, which is state owned, with its pension fund, which is the private property of its employees. Thus the public suspected that public money was going into the art market. This was never the case.

Still, it seemed difficult to reconcile the prosaic world of railwaymens' hard-earned pensions and the heady heights of international art auctions. In fact, the reconciliation was never really achieved, which is one reason for the fund's decision to withdraw from this area of investment. The fund's art activity is now limited to refining and consolidating its collection. No new funds are being invested.

Mr. Bosworth cites another reason for the withdrawal: the difficulty of justifying works of art as a good investments. Although the trustees revaluate the 2,500 objects every three years, the value of the objects is notoriously hard to assess and can fluctuate wildly.

The fund has always taken a public-spirited view of its art holdings. Over half of them are on long-term loan to public galleries and museums throughout the world. Most major British institutions are beneficiaries of this policy. This is also temporarily relieves the fund of the cost of security and insurance.

A certain amount of mystery has always surrounded the collection. No estimate of its current value is published and Bosworth is careful to avoid giving any hints. Nor has the collection ever been seen or even assembled in one place. There can be no doubt though, that the original investment will be showing a healthy increase. Just how it compares with other forms of investment would be fascinating to know. But unless the fund sells off the collection in one feel swoop, it is all but impossible to accurately assess. The fund's chairman would clearly be interested in testing the success of the experiment. But that would be rather like pulling a plant out of the soil to see how it is progressing; it can be done only once.

At present there is no need to sell. The Fund is not in need of the income from what is now less than 1 percent of its total assets.

But should the need to sell ever arise -- as it might if the maintenance of the collection were to become a problem or if support for it were to wane among the trustees -- we should indeed see the sale of the century.