That's not a bad idea at all, if it possible to somehow short a fund. On average, the new best-performing funds each year will invariably do worse the next year

That's not a bad idea at all, if it possible to somehow short a fund. On average, the new best-performing funds each year will invariably do worse the next year, just because on average they were lucky to do so well in the first place. But investors will be more drawn to them than to the funds that performed worse.