Hedge fund managers are riding their stock picks as long as possible, but overall returns continue to lag the market, according to a new report from Goldman Sachs.
The bank's 783 hedge fund clients turned over—sold a position before holding it for a year—just 28 percent of their portfolios, according to the report. The 12-year turnover average is 35 percent.
The turnover of funds' largest holdings also fell to an all-time low of 15 percent. And the average fund holds 63 percent of long assets in just 10 top positions,
In other words, top hedge fund managers believe their best ideas will continue to gain as the bull market hits new highs.
But equity-focused hedge funds returned an average of 10 percent through Oct. 31—far less than the S&P 500's 26 percent return—according to the report. Less than 5 percent of hedge funds outperformed the index as many were hurt by their short positions and hedges.
The data in the report represents $1.7 trillion of gross equity positions ($1.1 trillion long and $545 billion short) and is mostly based on publicly disclosed stock filings at the start of the fourth quarter. Goldman Sachs services many of the largest and best performing hedge funds in the world through its prime brokerage unit.
Goldman also disclosed the most popular stocks for its hedge funds clients, both long and short. The top five stocks are AIG, Apple, Google, General Motors and Citigroup. The top five shorts are Intel, Gilead Sciences, AT&T, Exxon Mobil and IBM.
Most hedge funds are still relatively bullish. The managers' portfolios were an average of 51 percent net long, meaning their long positions were far larger than their shorts. The high for the year was 53 percent in the first quarter, according to the report.
(Read more: Stocks 'very overpriced' and so what?)
Hedge funds hold large short positions in emerging market equities, volatility, gold, and high-yield bonds (via exchange traded funds), according to Goldman Sachs.
Those have all been winning bets so far this year. Through Nov. 26, the iShares MSCI Emerging Markets Index is down 6.09 percent; the iPath S&P 500 VIX Short-Term Futures exchange traded note, which tracks the CBOE Volatility Index, is down 28.91 percent; SPDR Gold Trust is down 26.05 percent; and the Credit Suisse High Yield Bond exchange-traded fund is down 3.13 percent.
—By CNBC's Lawrence Delevingne. Follow him on Twitter