Cliff Asness of AQR capital has an excellent blog - well worth reading. A recent posting is called a tepid defense of hedge funds.
This is a nice article and from it we can draw a few interesting conclusions...
1. Hedge funds look a lot like boring stocks (they have betas between 0 and 1).
2. Based on 1), hedge funds are not hedged. If they were, they would have zero betas.
3. The positive alpha earned by hedge funds is probably not enough to cover the 2/20 fees that they charge.
4. Hedge funds didn't really provide much protection in 2008.