There's an implicit assumption that return profile is what matters to the investor. It very often isn't. Quite often it's a simple cover-your-ass requirement. Gotta put my money somewhere, so anyone who isn't going to embarrass me is fine. Thus status quo.
Second, strategies do exist that barely lose money ever. I've a friend who runs a strategy that has had 4 losing months out of 100. Certified by a fund administrator. Sounds too good to be true, so the fund stays small. Everyone's heard of negative skew so they stay away.
There's also strategies that print money so regularly they don't need outside investment. You would be amazed at how simple it is. But I've actually reproduced this myself. You need some good execution to do it, but once it's up you don't need or want investors. If you get a bond like income stream, you might as well finance it like a bond. It's only stuff with low Sharpe where you need to share the risk.
So what do you see then? A bunch of traditional managers doing their stock picking where the result doesn't matter too much, and some funds with some alpha that isn't stable.