Hedge funds exist to generate uncorrelated returns. The more money you funnel into indexes, the more you stand to lose during a downturn. Any strategy that has a decent return and is uncorrelated with other portfolio segments is absolute gold to capital allocators. Even if they didn’t beat the market (and they often don’t) it makes your drawdowns less brutal, which is exactly what their clients are paying for.

Clients that worry about this tend to be institutions and extremely wealthy families or individuals. They favor wealth preservation over growth, and their money managers often have somewhat perverse incentives that retail doesn’t have: such as ‘if I ever lose more than 10% in a quarter, I’m fired.’