Hedge funds are more bullish on equities than they have been in six years and American International Group Inc. replaced Apple Inc. as the top-held stock, according to Goldman Sachs Group Inc.

Net long exposure to stocks in hedge funds climbed to 52 percent in the fourth quarter, matching the 10-year high reached in the first quarter of 2007, a team led by Goldman Sachs’ Amanda Sneider and David Kostin said in a report yesterday. For the first time in three years, iPhone maker Apple was not the most-popular stock held by firms, falling to third place as insurer AIG became the most-held position.

“Hedge funds notably reduced holdings of underperforming long-time favorites Apple and gold while raising allocations to rallying financials,” Sneider and Kostin wrote.

Hedge funds increased bets stocks will advance after returns failed to keep pace with the rally in equities last year as short sales limited gains. While the Standard & Poor’s 500 Index jumped 16 percent in 2012 including dividends, the average hedge fund returned 8 percent, according to Goldman Sachs. The average mutual fund focused on large companies returned 14 percent, the note said.

Apple tumbled 20 percent last quarter, the worst performance in four years, amid concern increased competition and a lack of breakthrough products will reduce profit margins at the world’s most-valuable company. The shares have slumped 16 percent this year.

Cutting Gold

Hedge funds also reduced holdings in the SPDR Gold Trust to the lowest in at least four years, Goldman Sachs said. The exchange-traded fund known as GLD, the biggest ETF backed by the metal, plunged 5.7 percent in the fourth quarter as U.S. economic concerns eased, eroding demand for the metal as an investment hedge. The ETF has lost 5.7 percent so far in 2013.

AIG surged 52 percent last year as the New York-based company finished repaying the last of its $182.3 billion bailout by the U.S. government. The shares are up 5.3 percent this year. Financial stocks rose the most out of 10 groups in the S&P 500 last year, rallying 26 percent.

The funds have continued to underperform relative to the S&P 500 this year, returning 3 percent through Feb. 8, Goldman Sachs said. The benchmark measure added 6.6 percent including dividends in the same period. Goldman Sachs’ report tracked 725 hedge funds with $1.3 trillion of equity positions.