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It's an interesting idea. You can make two funds sum up to a constant by taking opposite and equal positions.

But I am not seeing how you can control the direction the money moves. For example if you knew fund A will gain $x and fund B will lose $x, shouldn't you simply not make the trade in fund B?

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For the pros, its easy enough to structure a complicated transaction that analytically simplifies to "A loses $X + %risk, B gains + %risk", since you can create instruments with layers of elements like "A buys an derivsative on Foo, and B sells an derivative on Foo", where B controls Foo. The rest of the market is happy to buy from B and sell to A netting a small profit, even if B contols Foo, because they aren't exposeed to the risk of the derivative. when it comes time to settle, A pays a big loss to C, C pays slightly smaller loss to B, netting a motivating profit, and B gets a big gain.

You decide which fund has which position after it books profits and losses.

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