Hedge funds charge high fees, but a subset of them provide a product you can't get anywhere else: returns orthogonal to other investments. Sophisticated investors pay happily for it. What's being stolen?
What does the interest accrue in instead of money? Complex money with real part 0?
The dirty secret is that hedge funds do not work long term. The stock market goes up on average over time. A hedge fund that does not correlate with the stock market has no guarantee or even reasonable expectation of doing so. The stock market rises over time because its constituent companies create wealth, by building or manufacturing things. Hedge funds have no such underlying creator of wealth. The only way a hedge fund makes money is to find a bigger fool. For every highly-leveraged gain, somebody else lost the same amount by possessing or acting on less information.
Some hedge funds actually do achieve consistent gains by technical means, as the original article touches on. They can have the fastest computers closest to the exchange trading centers, that can beat other investors to attractive offers by fractions of seconds and/or pennies. There's no secret cabal conspiracy there though. Profit is the only motive; any apparent manipulation is just the result of everybody acting in self interest.
This is absolutely certain to be true, also goes for mutual funds, and it happens in the plain sight of almost every investor.
Hedge funds typically get two and twenty: two percent of your investment per year. Twenty percent of all gains. Apply this incentive structure to any sufficiently large pot of money and you make out like a bandit. Investors, not so much. Thankfully, if you have enough money to invest in a hedge fund you have enough money to pay someone who knows this to explain it to you.
Actively managed mutual funds charge a management fee, typically in the neighborhood of 1.5 ~ 2% a year. (These are, thankfully, coming down.) This compares to 0.2% a year for index funds. Since actively managed mutual funds do not add value -- another secret in plain sight -- this will, over time, result in approximately half of the investors' gains accruing to the money manager. Most investors just pick whatever their broker recommends (brokers shudder) or pick the default choice for their retirement plan, which is generally set via splitting that huge fee with whomever is tasked to do the recommendation.
Buy cheap index funds (or, if that strikes you as complicated, open an account with Vanguard and get one of their targeted retirement date options -- they'll work out the math for you).