It makes me wonder, why are rich people still investing in hedge funds? how are they still getting clients given all the data saying that most index fund outperform hedge funds?
Chasing an extra 2-3% in gains in return for exposing yourself to more draw down risk starts feeling very different when you have $200mm in liquid cash and even a modest +5% a year is $10mm.
On the other hand, sometimes you want above-average returns and are willing to pay the fee to potentially nab it.
There are reasons to not invest in index funds (why does anyone invest in bonds?) that have to do with the purpose of the investment not being to maximize return.
That said I think there's still a lot of ignorance and gambling going on, which is why the zombie index has yet to rise from the grave.
This is also why a lot of investment advice from time immemorial includes diversifying from stocks to bonds and other, more stable instruments as you age (e.g. commodities, real estate, etc.).
There's also other things about having a stable volume of trade being good, e.g. reduce the likelihood you are affected by runs, e.g. SVB in 2022, or oil prices in the height of COVID19 panics and supply shocks.