David Swensen, Yale’s endowment manager, recently delivered a lecture in London to an audience of charity trustees. Forget stock picking and market timing, he told them: asset allocation — the choice between broad classes of assets, such as equities and bonds — is the only investment decision that adds value.

Mr Swensen justified his conclusion by pointing out that both stock picking and market timing are necessarily zero sum activities: one investor’s gain is necessarily another’s loss. In truth, all secondary market trade is zero sum: only investment activity that improves the return on the underlying assets can benefit savers taken as a whole.

His claim finds stronger support in the research of Roger Ibbotson and Paul Kaplan, who analysed the dispersion of investment returns across a sample of fund managers and found that asset allocation accounts for most of the