* Hedge funds have exacerbated equity sell-off - Fidelity's Rossi
* Rossi sees U.S. equities hitting new highs in 2015
* Current sell-off is "mid-market correction" - Rossi
* Europe under pressure but weak euro should help -Rossi (Adds further comments and background)
By Sudip Kar-Gupta
LONDON, Oct 16 (Reuters) - The underlying strength of the U.S. economy should enable U.S. stocks to recover from this week's sell-off, said Fidelity Worldwide Investments' Dominic Rossi, which he said had been made worse by hedge funds' "poor" trades.
Stocks in Europe and U.S. equity futures extended their losses on Thursday, after Wednesday's global market rout, mainly caused by mounting concerns over the strength of the global economy.
The triggers for the equity sell-off had been a rise in the U.S. dollar and expectations of an eventual U.S. rate rise, said Rossi, global chief investment officer for equities at Fidelity Worldwide Investments, which manages $290 billion in assets, though he also blamed other funds' trading strategies.
"The structural factor that has triggered this relates to U.S. dollar and tightening financial conditions, but the market correction has been exaggerated by poor positioning," said Rossi.
"Long-only funds have not moved much but the hedge fund industry has been caught on the wrong side of the trade. And when hedge funds get caught they tend to sell first and ask questions later."
Rossi described the equity market slump of the last two weeks, which has seen the U.S S&P 500 index fall around 7 percent from record highs on Sept. 18, as a "mid-market correction" within a longer-term bull market.
"I'm looking to buy markets at current levels, particularly U.S. securities," said Rossi, adding he expected U.S. stock markets to beat their 2014 highs next year, and for the U.S. equity market to offer double-digit returns in 2015.
Rossi said developed economy stock markets would outperform emerging markets' equities, although he added that European equities were "stuck in the middle."
However, Rossi said a fall in the euro, oil prices and European stock market valuations would prop up European equities over the next year.
"At these levels, I'm not nearly as pessimistic about European markets as I was a few months ago." (additional reporting by Alasdair Pal; Editing by Lionel Laurent)