[dhammack]

The other thing hedge funds offer is alternative markets to track. So while some may track the U.S. stock market (which you can get by just buying SPY), some funds track other markets like commodities, foreign equities, housing, bonds, etc. Almost anything that you can put a price on you can find a hedge fund willing to trade. For these "nontraditional" investments it can be rational to pay someone even if they cannot beat the benchmark, simply because you couldn't do it yourself.