Hedge funds are simply a form of flexible fund that can a) invest in different asset types and b) go short on safe assets to increase the risk and expected rate of return.
I fail to see why this should cause any problem. If people wanna give their money to an intransparent high risk, high return fund they should be allowed to be so utterly stupid.
I have never understood this general rage against financial capitalism and particular instruments like hedge funds or derivatives during the financial crises.
The collusion between rating agencies and banks has been (and will once again be) the main problem which required two responses, to put all the mastercriminals behind bars and to heavily supervise and regulate (who watches the watchers?) or socialize the rating agencies. Of course this is not feasible as these very people basically rule us.
As I said, (financial) capitalism is not the problem, the political power of capital is.
I agree that anarcho-capitalism undermines itself. Keynes was totally right when he called his General Theory "mildly conservative", social democratic efforts that attempt to moderate the excesses of capitalism are not merely making everybody better off but also stabilizing the system politically, preventing that other options (in the first half of the 20th century namely communism and fascism) appear on the table. So conservatives are actually radical while social democrats are conservative.