Investing.com -- Morgan Stanley said in a note Thursday that institutional investors rotated heavily into technology during the second quarter, following the sector's outsized rally, while trimming exposure to financials and energy.

"US investors piled into Tech across cap sizes following the sector's outsized Q2 rally, while reducing exposure to Financials and Energy," strategist Nicholas Lentini wrote, based on aggregated 13F filings for the quarter ended June 30.

Large-cap investors lifted technology exposure by 5.8% in active share terms after the sector gained 32% in the quarter, while cutting energy by 1.3% and financials by 0.9%. Hedge funds followed the same pattern, adding 3.9% to technology.

Small-cap positioning is said to have diverged, with healthcare up 2.2% and financials up 1.8%, while industrials fell 3.7%. Morgan Stanley noted hedge funds cut small-cap industrials by 4.9%, more than the broader filer population, and raised their small-cap health care overweight to 39% of assets against a 22% weighting in the Russell 2000, driven by biotech positions.

The bank's screen of the largest active share increases within the S&P 500 was led by AES, Fox, EchoStar, Electronic Arts and Super Micro Computer, followed by The Trade Desk, Intuit, Warner Bros. Discovery, Digital Realty and Zimmer Biomet.

Also on the list were Bio-Techne, PTC, Charter Communications, Keurig Dr Pepper, Cooper Companies, NRG Energy, Jack Henry, Academy Sports and Outdoors, Wynn Resorts, CME Group, Extra Space Storage, Zebra Technologies, Martin Marietta, Equifax, Trimble and Atmos Energy.