Many of the largest US investment funds are being blocked from buying more shares in popular stocks due to diversification rules, as they struggle to keep up with indices that are increasingly dominated by a few massive tech groups.

Major asset managers and mutual fund specialists such as Fidelity, BlackRock, JPMorgan Asset Management, American Century and Morgan Stanley Investment Management have run into strict regulatory limits that determine whether a fund can be categorised as “diversified”.

The trend is a further sign of how a lopsided rally powered by just a handful of big companies is creating unexpected issues for investors and index providers, and follows news that even the Nasdaq 100 — the index most closely associated with high-flying tech groups — will be rebalanced to reduce the dominance of the largest groups such as Apple, Microsoft and Nvidia.