There are many potential goals, for example: - Focus on a particular sector, if a biotech-focussed hedge fund is up 4%, SPY is up 7% and biotech stocks in gene

There are many potential goals, for example: - Focus on a particular sector, if a biotech-focussed hedge fund is up 4%, SPY is up 7% and biotech stocks in general are up 1%, they have still outperformed. Clients will want exposure to that sector. - Tail-risk hedging, losing small amounts of money most of the time to make huge amounts during unlikely events. - Lower volatility, e.g. a fund which underperforms SPY slightly, but hedges against dramatic downturns in the market, so timing is not as important for redemptions. Sophisticated investors (the only people allowed to invest in hedge funds anyway) generally have more complicated requirements than throwing their money at an index fund and waiting decades to retire on the returns.