Hedge funds are the Galapagos islands of the financial services industry. So at least says Andrew Lo, the Massachusetts Institute of Technology economist who has pioneered the application of evolutionary biology to markets.

According to Mr Lo and many of his acolytes, markets are not efficient, as had been assumed by academics for the past generation, but rather they are adaptive, with participants following Darwinian rules. After periods of relative stability they will undergo periods of intense change as participants evolve to take account of new realities.