The whole thing is a mess.. not much paper work required to set up a hedge fund (depending on what sort of a fund it is)... but the filings can be tricky and expensive depending on what jurisdictions you plan to deal in.
I've read a few articles on the topic and spoken to a few fund managers about this. the legal costs about 75-100,000 plus 100k minimum first year operating expense. The pricey parts are the filings/structuring. You need licensed securities attorneys which cost about 500-1000 an hour.
Everything depends on where your investors are from. Are they offshore or domestic is the first question to ask. Rather than asking here, ask Hannah http://capitalmanagementservicesgroup.com/startahedgefund/offeringdocuments.html