A Hedge Fund is a type of alternative investment fund that pools capital from accredited or institutional investors and employs various strategies to generate high returns while managing risk. Hedge funds have a broad investment mandate and may use techniques such as leveraging, short selling, derivatives, and arbitrage to achieve their objectives. Unlike mutual funds, hedge funds are less regulated and can pursue more aggressive strategies, but they are typically open only to qualified investors due to their higher risk profile. Hedge fund managers often charge a management fee and a performance-based fee..

The IIFL Multi Strategy Fund, managed by IIFL Asset Management, is registered as a Category III Alternative Investment Fund (AIF) with the SEBI. It employs diverse strategies such as long-short equity, arbitrage, and derivatives-based trading to generate returns across market cycles. Unlike traditional mutual funds, hedge funds like this have higher flexibility in using leverage, short selling, and investing in complex instruments. They cater primarily to high-net-worth individuals (HNIs) and institutional investors due to higher minimum investment requirements, which in India typically start at one crore rupees. 

In 1949, Alfred Winslow Jones created the first hedge fund using leverage and short selling to reduce market risk. He combined long positions in undervalued stocks with short positions in overvalued stocks to hedge against market fluctuations, aiming for absolute returns regardless of market conditions. By the 1970s and 1980s, hedge funds began attracting high-net-worth individuals and institutional investors due to their ability to generate high returns through flexible investment strategies. Hedge funds became known for taking aggressive, high-risk bets and providing significant returns during favorable market conditions.