There are many types of hedge funds out there offering a variety of strategies.

Generally speaking, most hedge funds will try to offer superior returns or stable returns in any market.

But according to this chart from Morgan Stanley's Adam Parker, "hedge funds in aggregate are essentially long the S&P 500."

The chart shows the correlation between the S&P 500 and a broad equity hedge fund index. The closer a correlation is to 1, the more the two things are in sync.

The difference here is that you can buy an index mutual fund with expenses that are a fraction of a fraction of a percent, whereas a hedge fund will charge you 2% then take another 20% of your profits.

Of course, not all hedge funds are the same. And perhaps that's why investor will always make bets on the low probability that they've found the fund manager who can beat the market.