Index compilers are the new active managers. The point is illustrated by an embarrassing U-turn by MSCI. It has backtracked on plans to add ArtGo, a controversial marble company, to its China All Shares index. Shares that had produced a 3,800 per cent annual return plunged 98 per cent on Thursday.

MSCI’s index criteria once again appears flawed. This time, the damage to its reputation could be serious. The U-turn highlights the way index funds reflect subjective stock selections, disproving claims they eliminate human error.

It would have helped if Hong Kong-based activist investor David Webb worked for MSCI. Mr Webb had warned investors to avoid ArtGo. The company traded at a crazy 20 times net tangible assets. The anomaly persisted despite a first-half loss of $4.1m on revenues of just $6.8m. ArtGo, a stolid quarrying company, had an enterprise value to trailing ebitda valuation of more than 120 times at one point.