BusinessWeek has a new cover story out by Sheelah Kolkhatar about how despite the perception that hedge fund managers have large erect penises, their penises are actually quite squiggly looking. No it's actually about how despite the perception that investing in hedge funds is a great way to make money, the industries returns are disappointing and you shouldn't invest in one, you shouldn't want your pension fund to invest in one, and even if there's a great hedge fund out there you're not going to know how to identify it at the right now.
Something that I think is worth saying about this is that in my experience among laypeople the same folks who tend to have a negative emotional response to ideas like "efficient financial markets" are also the folks who have a negative emotional response to hedge fund managers. Basically hedge fund managers are involved in financial markets, so people who don't like financial markets also don't like hedge fund managers. But the reality is something more like the opposite—you're not going to make money turning your cash over to hedge fund managers because financial markets work pretty well. Inefficiencies exist and profit-making opportunities arise, but they don't just last forever. People rush in and the opportunities vanish, or else they simply aren't large enough to be exploited at bigger and bigger scale. Returns to skilled investing end up accruing to the people who have the skills (i.e. the managers) rather than to people who just have money.
It's a bit like how the television manufacturing industry has turned into a disaster not because the technology of the television is bad or because nobody knows how to make one, but because the technology is too good and competition has soaked away the returns. The difference is that hedge fund managers are able to exploit a weird tax loophole to pay much less than they ought to. That's worth complaining about. But it's a tax code problem, not an issue with the actual conduct of the funds.