The conditions that rewarded conventional portfolios are changing.

Passive investing did not rise on merit alone. It rose on a steady, price-insensitive flow of buying: decades of retirement contributions purchasing the market each month, whatever the price. The generation that holds most of that capital is now moving from saving to spending. As it does, the flow that lifted the market for years begins to run the other way, from regular buying to steady selling for income.

Two things sharpen the effect. For someone still saving, a poor decade is an inconvenience; for someone drawing an income in retirement, it can be permanent. And because so much of this wealth sits with a relatively small group, their caution tends to arrive at the same time, so the market's true depth is thinner than its headline size suggests.

Passive strategies now hold more than half of US fund assets, and they buy the largest companies most heavily, simply because they are the largest. The ten biggest names account for close to 40 per cent of the S&P 500, a greater concentration than at the peak in 2000. Owning the index has quietly become a large position in a handful of companies, and the diversification investors believe they hold is in good part an illusion.

Valuations tell the same story. With the cyclically adjusted price-to-earnings ratio near its highest in a century and a half, and the reward for holding equities over cash close to nothing, investors are being asked to take equity risk for very little in return. Since starting valuations are among the better guides to long-run returns, that is not an encouraging basis for the decade ahead. And because most portfolios are built in the same way and rebalanced on similar timetables, the crowding sits not in any single fund but in the shape of the whole industry.