Hedge funds are not about returns. They're about hedging risk. Thus, hedge funds. The original purpose of hedge funds was to allow investors to decouple themselves from traditional sources of risk (stock market plunges, housing market crashes, etc. etc.) and diversify their assets in a way that would normalize returns and make things at worst more predictable, and at best stable and predictable. This is also why they enjoy lax regulation, as they often don't invest in traditional methods or securities (or at least they did, things have changed somewhat).
Granted, that hasn't been the MO of every hedge fund ever created, but that is the fundamental point of a hedge fund. Framing the debate by saying "they don't even beat index funds and get paid billions" ignores the reality that investing in a way that diversifies risk is an extremely difficult thing to do, and even if a fund loses money it can still technically succeed at it's purpose and have earned it's commission.
Granted, that hasn't been the MO of every hedge fund ever created, but that is the fundamental point of a hedge fund. Framing the debate by saying "they don't even beat index funds and get paid billions" ignores the reality that investing in a way that diversifies risk is an extremely difficult thing to do, and even if a fund loses money it can still technically succeed at it's purpose and have earned it's commission.