Nothing is impossible. It’s the mantra of mountaineers, such as Rob Gauntlett, who at 21 became one of the youngest climbers to conquer Everest – although the oldest Briton to reach the summit, 65-year-old Sir Ranulph Fiennes, was more refreshingly honest: “You cannot believe how tall the bloody thing is”. It’s the mission statement of Nasa astronauts, such as Gene Cernan, the last man to walk on the moon – although the British men in sheds who built the Open University’s Beagle 2 Mars probe were soon using the phrase “difficult, if not impossible” to describe the chances of ever hearing it go ‘beep’ again. It’s even the marketing message of sportswear manufacturers, such as the company that kits out Britain’s women tennis players – “impossible is nothing”, says its advert... unless you mean reaching the second round at Wimbledon, that is.

Why, then, is it still impossible for a fund manager to offer a low-cost fund that can beat the index? Is this another peculiarly British failing?

Certain UK fund managers run adverts featuring snow-capped mountains and distant planets – and some even sponsor tennis. But still 70 per cent of their funds fail to beat the index, according to Fundamental Tracker Investment Management.

So why not apply some Tibetan/Nasa/Serbian baseliner-style pragmatism – and just buy a tracker fund? Because, by definition, index tracker funds that make even the smallest annual management charge will underperform the index. Financial advice firm Bloomsbury has calculated that even the cheapest unit trust, Fidelity Moneybuilder UK Index, will trail the All-Share by 3 per cent after 10 years, before allowing for tracking error. US pioneer Vanguard offered some hope last week, with a new All-Share tracker charging just 0.15 per cent a year – but it imposes a 0.5 per cent purchase fee, and offers the fund only via fee-based independent financial advisers and the Alliance Trust fund platform.

So why not design a bigger, better, faster tracker? In theory, it’s simple: just buy the index constituents with stronger performance prospects, and exclude the constituents likely to underperform. This addresses the basic flaw in funds tracking indices weighted by market capitalisation: they have to buy holdings after they’ve gone up in value, and sell them after they’ve fallen. A number of managers have tried to surmount this problem in innovative ways.

Hargreaves Lansdown launched its Active Tracker fund in the late 1990s. This was a passive FTSE 100 index tracker with an ‘active’ fund management overlay – the managers simply underweighted the sectors and shareholdings they were bearish on, and overweighted the stocks they were bullish on. But even though dot-coms became the obvious stocks to avoid, the fund’s performance fell below the index, and it was closed.

SPA, the exchange traded fund (ETF) provider, launched its first trackers based on the US MarketGrader fundamentals-based indices in 2007. These indices ignored market capitalisation and selected constituents using 24 fundamental measures of US companies’ strength - such as growth, value, profitability and cash flow. In back-testing, the MarketGrader Large-Cap index had outperformed the S&P 500, on an annualised basis, by 12 percentage points a year since 1998. In March 2009, however, SPA said that “current market conditions are unsuitable” and closed all six ETFs.

Invesco Powershares brought a similar approach to index tracking to the UK later in 2007. It launched new ETFs tracking the FTSE Research Affiliates Fundamental Index (RAFI) benchmarks. These RAFI indices aim to reflect a company’s economic footprint using fundamental measures of size – sales, cash flow, dividends and book value – and, up until last year, the RAFI US Large Cap index had outperformed the S&P 500 index by 2 percentage points, on an annualised basis, since 1962. At the time, I pointed out that these indices had never underperformed a falling market in a G5 country. But then they did.

Fundamental Tracker Investment Management has tried to simplify the impossible, though. This week, it released the latest performance figures for its Munro fund. This aims to outperform the FTSE 350 index by simply weighting the index constituents according to their total gross cash dividend payout. And it has managed to outperform the FTSE 350 index, and the FTSE 350 total return index, over the past 12 months. Admittedly, it has only done so in a falling market and not by much – a 20.9 per cent fall compared with a 25.3 per cent fall. But might it, finally, be on to a winner? As with the ladies singles, we’ll have to wait until next year.

matthew.vincent@ft.com