This is the crux of the matter.  No, there&#x27;s no evidence that these activities produce economic value of a magnitude that justifies their compensation.<p>A certain number of &quot;speculators&quot; are needed to provide liquidity to capital markets.  It&#x27;s unclear what that number is, but it is most likely nowhere near the level we currently see.<p>In essence, it is gambling.  These funds are supported on an ongoing basis by asset management fees.  This provides a nice living for the fund managers and employees.  They are structured so that the players experience all upside and no downside.  If they lose millions of dollars it&#x27;s not like the employees and managers are responsible for making it up (although sometimes there are clawback provisions, but not nearly as often as you would want).  But if they make millions they take a cut of their gains.<p>This most likely leads to unnecessary risk-taking. (unnecessary in the sense that there&#x27;s no net economic benefit from it).<p>So if this is largely a zero-sum game, who are the losers and why don&#x27;t they do anything about it?  Good question.  Most directly it is the institutions and wealthy individuals who invest with hedge funds.<p>These institutions&#x2F;individuals do it because as a species we have a flawed reasoning capacity and overestimate our ability to exercise good judgment.