Shhh! Whisper it quietly, but what if the whole active fund management business is a con? What if the multi-billion pound investment game, employing thousands of highly-paid money managers in the City, is based on a myth? What if the Emperor’s got no clothes?

Maybe that’s overstating it, but there is compelling evidence that all but the luckiest fund managers are doomed to underperform not just the averages but simple quantitative approaches to stock selection. If machines can really do it better, why do we accept an expensive, inefficient system that makes us pay through the nose for mediocrity?

You are probably aware that most active fund managers underperform their benchmark. You may even be aware that 90pc of investment returns are nothing to do with stock selection but a product of being in the right or wrong market or asset class each year. You may not have considered that there might be something hard-wired into the human brain that makes active investment a mug’s game.

That is the implication of an interesting piece of research by Dresdner Kleinwort’s behavioural strategist James Montier, in which he questions why the City offers so few funds based on simple quantitative approaches when the data suggest these models significantly outperform human judgment.

His work is based on a study of 136 different decision-making situations in which mechanistic models were compared with approaches relying on an assessment of the facts by supposed experts. Just eight of the 136 found in favour of human judgment and in each of these cases the people had extra information that the quantitative models did not. On average the experts made accurate or successful judgments in 66.5pc of situations, while the quantitative models had a hit rate of 73.2pc.

Read more: The unsaid truth: machines are better stock pickers