Slavish adherence to index-based benchmarking is storing up trouble, according to Richard Timberlake, godfather to the UK multi-management industry. 'The industry needs to consider whether risk is well defined by being too much under or over a benchmark or whether there is greater risk within the benchmark itself,' he says.

Timberlake says investors with a global benchmark would have been forced to track a universe 44% invested in Japan in December 1988, when the Nikkei was at 30,610. Ten years on, the Nikkei was nearer 14,000, or just 10% of the total.