A hedge fund is a pooled investment vehicle which invests in risky securities, in pursuit of generating alpha for their clients.
Sebi regulates hedge funds with its AIF Regulations.
Hedge funds are not commonly subscribed to by retail investors because they are not distributed through the regular channels but are privately sold (mostly to FIIs or/and HNIs).
Hedge funds bank on undervalued, overvalued securities, convertible bonds, news and information about mergers and other factors to try and unlock returns for its investors.
Hedge fund managers hold both long and short positions on various securities depending on their role in the portfolio (say, buying undervalued stocks and selling overvalued ones). This also makes hedge funds high risk-high returns.