Hedgies all in on stocks; here's how to play it

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Hedge funds grab Apple

After years of underperforming the market, hedge funds have gotten hot on stocks.

Allocations in the $3 trillion industry have turned to their most bullish positions ever, with a net-long exposure of 57 percent entering 2015, according to a Goldman Sachs analysis.

Jumping on the equities bandwagon hasn't helped turn around the group's waning fortunes, however. The average fund has returned just one percent in 2015, lagging major indexes like the , which is up 2.4 percent so far, and the Russell 3000, which has risen 2.6 percent. The reason is a "poorly timed" move that came as the index slid 3 percent in January, the analysis said.

Goldman did deem the returns "respectable" given that the Sharpe ratio, which measures returns when adjusted for risk, is 0.2 for hedge funds and 0.1 for the S&P 500. That's some consolation for an industry that has underperformed the S&P 500 for six years running—essentially, since the end of the financial crisis—and brought home just a 3 percent return in 2014 when the broader market gauge jumped nearly 14 percent.

"Market timing and popular positions have worked against hedge fund returns YTD while a rise in volatility and commitment to energy stocks have supported returns," Goldman said in a report for clients.