The public perception of hedge funds is largely attributable to the headline-grabbing failures of two specific subcategories of the large species known as “hedge funds”: the basically one man shops that turn out to have been have been total frauds, usually from day one, sending out phony statements or deviating wildly from their stated investment strategy without mentioning it to their investors until it was too late; and the large funds using astronomical leverage (think LTCM). Some hedge funds stopped calling themselves hedge funds for a few years after the LTCM debacle, insisting on being called “private investment funds” instead, in an attempt to distance themselves from the stigma associated with “hedge funds”.
But as I'm sure you know, there have been more than a few FR members who like to blame hedge funds for anything that's gone wrong anywhere as well.