To be sure, the new products offer only a sliver of what many of the original hedge funds promise to deliver. The original funds' strategies can be labor intensive, research heavy and complicated, focusing on non-agency credit trading, for example. Liquid alternative funds' strategies are generally simpler, often involving stock picks.
But the draw is powerful. Assets in open-ended alternative mutual funds stood at $142 billion at the end of January, up 44 percent from a year ago, data from Morningstar show. McKinsey & Company consultants forecast that retail alternatives, including hedge funds, will likely make up 13 percent of U.S. retail fund assets by 2015, from 6 percent in 2010.
"Being able to add some hedge fund DNA to the 401(k) market is going to be an essential benefit for investors as well as the hedge funds that are participating,'' said Averell Mortimer, chief executive officer of Arden Asset Management, which raised more than $1 billion for its liquid alternatives fund sold through Fidelity.
Read MoreStarved for cash, main street turns to alternative lenders
Private equity funds are also eyeing the retail space. David Rubenstein, co-founder of industry giant The Carlyle Group, said that there will be a time for private clients to enter his types of funds, adding "that will be an enormous growth opportunity for people like us.''
But for hedge funds, getting into the liquid alternatives space early could also be a defensive play, as big institutional investors start to push back against high fees and returns that sometimes fail to beat the stock market indices.
"Hedge fund managers should be hedging their business,'' said Brad Balter, Managing Partner of Balter Capital Management which invests in hedge funds and is now offering its own liquid alternatives fund.
Follow us on Twitter: @CNBCWorld