Most popular press analysis of hedge funds that I've seen lumps them all together and assumes they're all primarily aiming to provide greater expected total returns than any of the major equity indexes. However, judged by this metric, the S&P 400 midcap index has historically outperformed the S&P 500 index, which has in turn historically had higher total returns than a balanced portfolio of index funds and bonds. Be careful about any analysis that when applied to these investment options would conclude that someone in their 50s should hold all of their money in an S&P 400 index fund instead of having a better diversified portfolio.
Many hedge funds aim to have better risk-adjusted returns by some metric (say, Sortino ratio or Sharpe ratio) than the major stock indexes or other asset class benchmarks, or the traditional advice of a balanced portfolio of equity index funds and bonds. They often consciously sacrifice some expected returns in exchange for reduced downside volatility.
Some hedge funds try to provide as good returns as possible while having as low correlation as possible to the major asset classes available outside the fund (equities, bonds, commodities, real estate, etc.). These sorts of funds expect their investors to have major holdings in equities, bonds, commodities, real estate, etc. outside the fund. These sorts of funds view themselves as an extra option for diversification for individuals who are already well diversified in the major asset classes.
Some funds (mostly short-only funds) aim to be anti-correlated to some asset class (typically equities) as cheaply as possible, so that holdings in the asset class combined with holdings in the fund result in better risk-adjusted returns (say, Sortino ratio or Sharpe ratio) than just holding major index funds along with some out-of-the-money long-dated puts on those indexes. Many of these sorts of funds expect to have several years of small losses, punctuated by large gains in years when their investors' other holdings have major losses.
In short, I'm sure there are plenty of just plain poor funds out there. However, depending on the investor's utility function and holdings outside of the hedge fund, it may be rational for the investor to have holdings in a hedge fund even if that fund consistently under-performs the S&P 500 and MSCI World Index.