Hedge funds trailing the Standard & Poor’s 500 index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years, Bloomberg reported.

A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the S & P 500 index by 2.65 percentage points.

Money managers struggling to catch up with the gains in the overall market have contributed to the rally that pushed the S & P 500 up 27 percent since October as economic reports beat estimates.

Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted.

Short bets reached a five-year peak in October 2008 just before the S & P 500 started a rally that has lifted it 107 percent over three years, Bloomberg said.