What is hedging in investment? You buy something that tends to rise AND something that tends to sink. You are betting for the best horse AND hedging your bet with a slow nag. That kind of hedging makes no sense.
You can hedge against an expected catastrophe, like inflation or deflation. You can hedge against expected market changes or new regulation.
It has been demonstrated that almost none of the hundreds of hedge funds existing generates alpha. Why are they prospering? Because there are pension funds, wealth funds and so that need management, and the services of a professional "safe" management. It is not really expensive, about 2% per year.
If they maintain their value is enough of an achievement and justifies the fund manager's salary. Eventual alpha is only a bonus, not really expected.
Therefore, if a managed fund produces AT LEAST the same as an index fund, then it is worthwhile. If it does so by investing in lower risk bets (if there really exist such a thing) then it is the best thing available.
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