According to the WSJ:

The fast money is proving slow to jump on the market’s bandwagon.

Hedge funds, decried by many as quick traders, have played catch-up during the market rally since March. The average fund was 45% “net long” as of May 19, or had investment holdings valued at 45% more than its bearish “short” positions, according to Hedge Fund Research.

That figure is up from 33% earlier this year, but still is far below its 55% level a year ago. Funds are less bullish now than they were just before the market crumbled last fall.

Hedge-fund managers, and their investors, said many remain in a neutral position. Hedge funds tend to underperform stock-market averages at inflection points, in part because they aim to create a “hedged” performance, rather than ape the market.

While a stock surge might force a mutual-fund manager to jump in because he is judged against the index, the pressure on hedge funds is less.

Many funds are skeptical the economy has entered a new period of growth that justifies high equity multiples. Others fear dislocations from governments shoveling money at problems.

Some noted stock pickers remain wary.

Steve Mandel’s Lone Pine Capital bought long-dated, out-of-the-money call positions representing 2.6 million shares of a gold exchange-traded fund in the first quarter, while Och-Ziff Capital Management Group and Atticus Capital have been cautious on the market. A call option is the right to buy a security at a certain price.

If stocks keep surging, hedgies might have to jump in with two feet, giving the market another lift. But their continued hesitancy should be a sign of caution for investors.

Could this be potential fuel for the rally to continue?