THE MAN credited with blueprinting BGI's investment strategy is Richard Grinold, below, who with Ronald Kahn wrote the bible of quantitative investment, `Active Portfolio Management: A quantative approach for producing superior returns and selecting superior money managers'.

Using Mr Grinold's theories, BGI claimed to pioneer a revolution in the investment industry when it introduced the index strategy in 1971 and the first quantative active strategy in 1978. Mr Grinold says a fund manager must show an edge for every asset chosen and must diversify that edge over many separate assets.

This is like game theory. Roulette players can bet on red or black, but the casino has an edge because two numbers, 0 and 00, are green. That is true whether players bet pounds 1 on 10 million spins, or one player bets pounds 10m on one spin. To spread risk and raise the chance of winning, casinos prefer the former.

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