Many hedge funds invest in lots of things other than publically traded stocks e.g. local bonds, property companies, etc.. if you have some expectation the marke

Many hedge funds invest in lots of things other than publically traded stocks e.g. local bonds, property companies, etc.. if you have some expectation the market will tank ala 2008, you probably don't want to keep all of your money in the market, even if you get lower returns overall.. Also, not sure about hedge funds, but alot of mutual funds exist with a specific focus - one country, sector, asset class, etc. They try to do well within that category... Just because the 'average' does worse, doesn't mean there aren't a few that do far better if you pick the right one.. Whether you think it is good to invest in that sector over the short or long run and why is up to you based on your portfolio and expectations for the market over the holding period.. As others have said - diversification.