The bear funds keep a "net short" exposure to stocks, aiming to rise when markets fall. The cost of making that bet and the rising markets have helped the category deliver a negative 13.5 percent return this year, according to Lipper data through early August.
"It's sort of become almost a cliche that this has been the most hated bull market of all time, and I have a hard time buying into that," said Doug Ramsey, chief investment officer of the Leuthold Group LLC, whose firm offers a bear fund, the Grizzly Short Fund.
The company's tactical funds recently reduced their net equity exposure, but he said he could see another fresh top before entering a true bear market.
"We're only looking for a short-term setback here," he said.
Several major asset managers have expressed caution in recent days.
Bridgewater Associates LP's Ray Dalio wrote on Thursday that "prospective risks are now rising and do not appear appropriately priced in."
Russ Koesterich at BlackRock Inc said in a note this week that tightening monetary policy in Europe and the United States could cause political uncertainty to morph "from farce into tragedy" by shaking investor confidence. Pacific Investment Management Company LLC portfolio managers Mihir Worah and Geraldine Sundstrom said U.S. equities are "popular and crowded."
But some investors see the moderate U.S. equity flows and strengthening demand for bearish funds as a contrarian sign that the markets may have more room to run.
The nonprofit American Association of Individual Investors found that 36.1 percent of investors it surveyed expect the market to rise in the next six months, 2 percentage points below that gauge's historical average. An above-average 32.1 percent of investors were bearish.
"You don't see the kind of euphoria that normally presents at the end of the cycle," said Leon Cooperman, chief executive of hedge fund Omega Advisors Inc. "I don't see sentiment characteristic of a top."