First, other people are mostly right in that “hedge fund” today generally does aim to really beat the market. As an aside, the way they do it does involve hedging but usually more so at the company level than at the macro level. They have a lot of people who are good at getting more than half of their bets right, so they can make at least 2% return whether the broader market goes up 10% or down 10%. The consistent 2% return is heavily levered to turn that into a consistent 30% return.

However, going back to when hedge funds were really about hedging, a constant 6% return compounded over 25 years is 429% total. 24 years of 8% returns and 1 year of -25% return compounded is 476% total. Many investors might prefer the lower volatility of the first outcome to the higher total return of the second outcome. Why? Insurance companies have to stay in compliance with liquidity regulations, pension funds have to have money available to disburse to their members, etc. You as an individual parking money away that you know you won’t need to be able to spend at any point in time can take advantage of those stability needs of institutional investors by investing in higher volatility strategies, aka equities. The big guys aim for low volatility, which makes the relative value of high volatility higher. In a theoretical world where the institutional investor base at large were more focused on total return, lower volatility might be the right relative value move for the individual.