Stocks reaching record highs in early July haven't caused hedge funds to decrease their market exposure. In fact, many are adding to their bullish bets.
Hedge funds that practice a "market neutral" strategy—generally keeping their long and short bets in balance—are now 18 percent net long, according to Bank of America Merrill Lynch data as of July 2.
Market neutral funds average an exposure of zero; the new positioning means they are relatively bullish, with a preference for stocks displaying a potential for growth and those with relatively small market capitalization, according to the firm. By comparison, the same funds were 10 percent net long as of June 18.