I am reasonably entertained by this thread, and makes me think a lot. Questions:

1) You are implying that Fund Managers are allowed and encouraged to take excessive risk, while I thought it is regulated. May be not in Malaysia, I suppose.

2) If such a fund exist, given the higher risk taken, it tends to perform worse than other funds. If we believe in market with free competition, it will lose its client much faster than others, and soon out of business. Unless it is a monopoly or oligopoly market, such a fund should be and would be short lived. Again, is this very different in Malaysia ?

3) All financial institution is governed and regulated on the amount of risk they took, basic measurement such as the Greek factors, and Value At Risk calculations should be reported to the central bank regulatory. Is that not the case for Malaysia ?

4) Hedge funds does not operate based on 'hedging' per se, but rather they do delta hedging using Black Sholes formula. However, there are funds that don't and still call themselves hedge fund. Is there any hedge funds in Malaysia ? Without the ability to short the market, I would imagine delta hedging is impossible.

5) The key concept of finance is all about opportunity cost. When a person hire a fund managers and pay him for transaction brokerage fees, you mentioned it is a 'head you win, tail I lose' situation, but do not forget the person frees up his time in doing those transactions and able to use those time to earn money. Some would argue that what is important is 'Can you earn more than the brokerage if you were to do it yourself?' rather than declare that paying brokerage mutual funds is not worth it. What is your opinion on this ?

6) The same opportunity cost goes on hiring a fund manager. If one were to spend time pick up finance and investment as a subject (depends on your maths and econs foundation, it can be done in 3 months to few years), and then willing to do analysis on all companies that he is tracking (which is time consuming) and also collect and consolidate market information (super time consuming for a normal person), I see a huge amount of time and effort invested. Time, is money. I would imagine the question is back to 'How much can you earn with those time spent on other areas, such as your job?". What do you suggest ?

7) Imagine a person spent all the above time and effort and now become capable of managing his own investment, his cost is probably still higher than a fund manager, because fund manager would be able to spread his cost over larger amount of transactions (and more clients), compare to the individual. Can the individual really do it more cost effective than a fund manager ?

8) Assuming both can do the same efficiency and effectiveness in investment, which would also translate to the fact that the chances of success is the same. The individual can make the same mistake as the fund managers. The only difference is how risk averse is the individual. If the individual is highly risk seeking, he/she will potentially bet bigger than the fund (which should be regulated on total risk committed). So I suppose your suggestion is for investor who is highly risk averse, who would bet lesser than the fund manager and therefore lost less money should the bet turn bad. What do you think ?

9) Given the above, I would also think you may want to consider this: If the fund manager is more prone to taking higher risk, which has higher return, it is best to engage them during the bull time. When bear market comes, just withdraw your money and put it into bond or other fixed income product. Isn't it better to make use of fund managers for what they are good at, rather than discount them completely ? Would like to hear your opinion on this.