I would say there are two ends of the spectrum. On the idealistic side: The market for equities is enormous. Making it work requires some blunt instrumentatio

I would say there are two ends of the spectrum. On the idealistic side: The market for equities is enormous. Making it work requires some blunt instrumentation. This creates inefficiencies that hedge funds exploit. These exploitations make the overall market more efficient and make the hedge funds money. On the skeptical side: Hedge funds charge 2% of AUM and 20% of returns. They use some of these profits to market to investors and convince them that they are the smartest people in the room. They keep the fund afloat as long as they can until they need to raise another round. I think the reason why hedge funds exist is somewhere between the two.