[hollowcelery]

If an investor wants returns that are orthogonal to the market or that avoid exposure to specific factors, then ETFs aren't really an option. This is why pension funds etc. will have some investments in index funds but will also diversify into hedge funds and alternative investments.

Hedge funds and related investment vehicles aren't for most people, but they do perform an important function in the markets. Not everyone can invest passively -- someone has to actually enable price discovery.

[smabie]

Moreover, in a highly correlated world it is unsurprising that institutional investors are eager for less correlated sources of return. The problem is actually finding it: as an allocator you are being adversely selected against. If a hedge fund is willing to take your money, we'll maybe it isn't that great of an opportunity after all.