A damn hedge fund is one of the most complicated investments available--not to mention expensive.
Secondary to that-- unless his friend has a whole lot more money somewhere else--she doesnt even qualify to invest in Hedges or Futures.
Ever heard the term "Qualified Investor"? That means someone with fairly high liquid net worth--otherwise, the SEC has determined that these products are completely unsuitable for someone with limited assets, and limited experience.
As far as managed futures "killing" the S&P, well...thats just not true.
Had you been in futures in 2000-2001, or 2008-09, say for example Campbell, or Frontier, or any of the other top rated Managed Futures funds--depending on the strategy you were in, you could have lost somewhere around 70% of the value.
SEVENTY PERCENT!!
In addition--all of these products are sold by subscription, and have limited liquidation events. In other words--if this person did somehow take your advice and sunk $100k into either one of those --and the market went south like it has in the past, or her transmission went out, or her roof started leaking--she better have some cash in the bank, cause it could take 3-4 months to get out of a hedge or managed futures.
But-- the single biggest element that you missed completely is that these ARE NOT INVESTMENTS! They are .....hedges!
Thats why the returns are so different from the indexes. Thats the whole purpose for them--in all practicality, buying a hedge or future is almost like putting insurance on something you own.
If they are used correctly, as intended, they are designed to provide returns and performance that is non-correlated to the markets as a whole--and whatever individual product or holding you are trying to protect--or "HEDGE", hence the name. They definitely have a place and a use--but not as an investment. We use them frequently in our practice, and have many high net clients in them--but they are used as a buffer for large holdings they have.