Why don't we turn the academic literature then. There, failures are just as interesting as successes.

1. Activist hedge funds are high risk high reward. So yes, selected bias would make them seem like outlier successes beyond their competitors. Let me steel man your argument: Ryan and Schneider (2002) predict that larger hedge funds are likely to be more activist, and that looks roughly the case (consider Blackrock which managed just about everything everywhere). That's reverse causality right there.

Unlike pension fund and mutual fund managers, hedge fund managers face no legal requirement to diversify, and may instead ‘‘bet the farm’’ on target firms. Taking large stakes in few firms encourages them to become involved in firm management (Brav et al. 2008a).

Unlike pension fund and mutual fund managers, hedge fund managers face no legal requirement to diversify, and may instead ‘‘bet the farm’’ on target firms. Taking large stakes in few firms encourages them to become involved in firm management (Brav et al. 2008a).

However, would that explain all the variance? Possibly. But it's not the only nor most parsimonious explanation.

Hedge funds are also able to engage in investment strategies that make them different in kind from institutional investors. In addition to selling short, a hedge fund might purposefully engage in actions intended to decrease a company’s stock value. For example, at Lowe’s Corporation (Anson 2002a) and Dura Auto Systems (Grossman and Nussel 2008), hedge funds purchased sufficient distressed debt of the troubled firms to compel their executives to declare bankruptcy, then transformed them from public to private companies, with other investors largely losing their equity in the process.

Say you picked the highest return indexes - generally emerging country indexes' risky industries. Consider what activists could do to those kinds of firms? Suddenly those indexes's businesses don't look so solid anymore..

But a conclusion in 'Marguerite Schneider and Lori Verstegen Ryan's "A review of hedge funds and their investor activism: do they help or hurt other equity investors?" where these quotes come from, is that hedge funds tend to be even more activist than be explained by that background noise. That suggests there is some sense in activism, at least among institutions (if regular high net worth individuals pooled their funds they might very well fuck up without great proxy advisors)