<p>In the second quarter of 2025, significant adjustments were observed in institutional holdings in the U.S. stock market. Morgan Stanley's latest 13F analysis report indicates that investors continued to increase their positions in the technology, industrial, and communication services sectors, while reducing holdings in the healthcare, financial, and consumer staples sectors. The positioning strategy of hedge funds was particularly noteworthy: not only did they maintain an underweight stance on technology stocks, but they also showed a strong preference for small-cap healthcare stocks. Additionally, the dominance of domestic funds in the S&amp;P 500 index was further solidified, accounting for as much as 81%.</p>
<h2>Sector Allocation: Technology Leads Increases, Healthcare Faces Reductions</h2>
<p>In the second quarter, institutional investors made significant adjustments to sector allocations. The technology sector saw an increase of 1.9%, while the industrial and communication services sectors increased by 0.6% each, becoming the three major winners; in contrast, the healthcare sector was reduced by 1.3%, and both the financial and consumer staples sectors were reduced by 0.7%, collectively forming the main force of reductions.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/070cb3551062f23e913fe76c0e1c6e07.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/070cb3551062f23e913fe76c0e1c6e07.jpg"/></p>
<p>From the perspective of active weights (the sector allocation percentage in the 13F report minus the sector weight in the S&amp;P 500 index), the changes in holdings for most sectors were basically in sync with index performance, a trend that remained consistent across the entire market and among hedge funds.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/8b53994802e70f1a2d964548535d394e.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/8b53994802e70f1a2d964548535d394e.jpg"/></p>
<p>It is noteworthy that there was a divergence in the consumer discretionary sector among large-cap stocks: hedge funds actively increased their holdings by 0.6%, contrasting sharply with the overall market's reduction of 0.3%, indicating hedge funds' unique judgment in this area.</p>
<h2>Small-Cap Stock Trends: Technology and Consumer Discretionary Become New Favorites</h2>
<p>The adjustments in holdings in the small-cap stock market were even more aggressive. The technology sector saw an increase of 2.3%, and the consumer discretionary sector increased by 0.9%, becoming the focus of investors' increased positions; meanwhile, the consumer staples and healthcare sectors were reduced by 0.9% and 0.8%, respectively, facing significant sell-offs. Similar to large-cap stocks, the technology sector was also the core driving force behind the increases in the small-cap stock market.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/300cb56afb3b4509076301fed877acc8.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/300cb56afb3b4509076301fed877acc8.jpg"/></p>
<p>Hedge funds exhibited broader operations in small-cap stocks, with an increase in the active allocation ratio to small-cap financial and communication services sectors in the second quarter, reflecting a deeper exploration of niche areas within small-cap stocks.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/6fd116267fd5d25b0a67ea51d04dfc0a.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/6fd116267fd5d25b0a67ea51d04dfc0a.jpg"/></p>
<h2>Hedge Fund Positions: Long-term Underweight in Technology, Overweight in Small-cap Healthcare</h2>
<p>Despite the strong recent performance of technology stocks, hedge funds have maintained a long-term underweight stance in the technology sector for several years. Since 2017, influenced by the rapid expansion of giant tech stocks, both the overall market and hedge funds have kept a low allocation to the technology sector.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/47d9b89da59fa446fb2f294e0fa4772b.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/47d9b89da59fa446fb2f294e0fa4772b.jpg"/></p>
<p>In stark contrast, hedge funds have a significant allocation in the small-cap healthcare sector: it accounts for as much as 28% of hedge funds' small-cap assets, while its weight in the Russell 2000 index is only 10%.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/c5117398a7b41beb33fa19710a5bf933.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/c5117398a7b41beb33fa19710a5bf933.jpg"/></p>
<p>This overweight is primarily driven by small-cap biotech stocks, with the funding supporting this allocation coming from a relative underweight in the financial and industrial sectors (compared to the Russell 2000 index weight).</p>
<h2>Regional Positioning: Dominated by U.S. Funds, with Industry Distribution Variances</h2>
<p>Regional distribution data shows that U.S. domestic funds account for 81% of holdings in the S&amp;P 500 index, while funds from Europe, the Middle East, and Africa account for 16%, and Asia-Pacific funds only account for 3%.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/ca1d67df48f83373ac491cf35bdaa767.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/ca1d67df48f83373ac491cf35bdaa767.jpg"/></p>
<p>From an industry perspective, the energy sector has the strongest North American attribute, with 86% of assets coming from North American funds; while the real estate sector is the most internationalized, with 22% of funds coming from overseas.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/1ee8f21351893af8e82d31988428c0a8.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/1ee8f21351893af8e82d31988428c0a8.jpg"/></p>
<p>There are significant differences in industry preferences by region: funds from Europe, the Middle East, and Africa have a 2% higher allocation to the technology sector compared to the U.S.; Asia-Pacific funds have the highest allocation to U.S. tech stocks at 34%; while Latin American funds have the lowest at only 26%. Latin American funds tend to allocate more to materials, financials, and healthcare sectors as a substitute for holdings in tech stocks.</p>
<h2>Changes in Individual Stocks: Tech Giants Favored, Some Consumer Stocks Abandoned</h2>
<p>In the second quarter's adjustments to individual stock holdings, tech giants stood out. Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL) ranked as the top three actively increased holdings by hedge funds, with increases of 7.4%, 7.1%, and 5.8%, respectively. Additionally, tech and internet giants like Amazon (AMZN) and Meta (META) also saw significant increases in their positions
<img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/de5bbb4fa13e376871f031aaeb4c29d4.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/de5bbb4fa13e376871f031aaeb4c29d4.jpg"/></p>
<p>At the industry level, the stocks with the most increased holdings are concentrated in the semiconductor and software services sectors. Enphase Energy (ENPH) leads with a 7.7% increase, followed closely by insurance company Brown &amp; Brown (BRO) and food company Campbell (CPB).</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/36cb4272b8bb6650712f1673f9c938ef.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/36cb4272b8bb6650712f1673f9c938ef.jpg"/></p>
<p>On the reduction side, credit scoring company FICO (FICO) reduced holdings by 6.2%, and luxury goods company Tapestry (TPR) reduced holdings by 4.9%, becoming the stocks with the largest reductions.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/1f536515d2f4cbc83ad4bb73ea771ada.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/1f536515d2f4cbc83ad4bb73ea771ada.jpg"/></p>
<h2>Historical Holding Trends: Structural Changes in Industry Preferences</h2>
<p>From historical data, investors have long been overweight in the industrial and healthcare sectors, while being underweight in the technology and consumer discretionary sectors.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/fd4280f2067e8ee7edc10209f8d626d2.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/fd4280f2067e8ee7edc10209f8d626d2.jpg"/></p>
<p>The underweight position in the technology sector has been exacerbating since 2010, mainly due to the high weight of mega-cap tech stocks in the index, with some investors constrained by risks associated with single holdings or industry concentration. The underweight degree in the consumer discretionary sector has narrowed in recent years after hitting a bottom in 2023.</p>
<p>The characteristics of hedge fund holdings are even more pronounced: although the overweight ratio in the consumer discretionary sector shows a downward trend, it remains higher than the overall market; the underweight degree in the technology sector is more significant than the entire market, while the overweight in the industrial and healthcare sectors is even larger.</p>
<p><img src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/0d58d3df9962e5ab78fe64d99f1cebce.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/http://img.zhitongcaijing.com/images/contentformat/0d58d3df9962e5ab78fe64d99f1cebce.jpg"/></p>
<h2>Summary: Institutional Strategies Reflect Market Themes</h2>
<p>Changes in institutional holdings in the second quarter show that while the technology sector has generally seen increased holdings, hedge funds' long-term underweight attitude remains unchanged, reflecting caution regarding the valuation risks of mega-cap tech stocks. The continued overweight in small-cap healthcare stocks highlights institutions' optimism about the growth potential in the biotechnology sector. In terms of regional allocation, the dominant position of U.S. funds and the differences in industry preferences across regions provide a reference for cross-market layouts
For ordinary investors, it is important to focus on structural opportunities within the technology sector, the growth logic of small-cap biotech stocks, and the cross-border investment windows created by regional allocation differences. However, it should be noted that the 13F report only reflects the holdings as of June 30, and subsequent market fluctuations may have led to adjustments in holdings, so decisions should be made based on the latest developments.</p>
<p>(Note: The data in this article comes from Morgan Stanley's Q2 2025 13F holdings report, and the analysis is based on the holdings research of the Top 100 funds and Top 100 hedge funds, excluding derivatives and short interests.)</p>

.SPX

<p>Morgan Stanley's latest 13F analysis report shows significant adjustments in institutional holdings in the U.S. stock market for the second quarter of 2025. Investors continue to increase their positions in the technology, industrial, and communication services sectors, while reducing holdings in the healthcare, financial, and consumer staples sectors. Hedge funds maintain an underweight position in technology stocks while favoring small-cap healthcare stocks. The proportion of domestic funds in the S&P 500 index reaches as high as 81%</p>

- In Q2 2025, U.S. institutional investors significantly adjusted their holdings, increasing positions in technology, industrials, and communication services while reducing exposure to healthcare, finance, and consumer staples.  
- Hedge funds maintained a long-term underweight in technology stocks but showed a strong preference for small-cap healthcare stocks, which constituted 28% of their small-cap assets.  
- The dominance of U.S. funds in the S&P 500 reached 81%, with notable regional differences in sector preferences, highlighting opportunities for investors in technology and small-cap biotech sectors.

Zhitong

S&P 500

Morgan Stanley Analysis 25Q2 13F Holdings Report: Institutional Trends Reveal New Trends in US Stocks, Technology Leads Increases, Healthcare Faces Reductions