No surprise here, for the new order is being built around the demolition of technology stocks. The same funds were gung-ho on the ICE sector in 2000 and had jettisoned diversification in pursuit of bounty profits.
Diversification is the basic tenet for investments in the stock market or any other asset class.
Simply put, it means not putting your eggs in one-basket, spreading risk across securities and building the portfolio with varying blocks. Well, with most diversified equity funds investing their assets in technology, the plunge from the top was only a matter of time. Had the portfolios been well spread out, the losses on technology could have been offset with gains on other sectors since different fundamentals and risks govern different sectors. On the other hand, unrelated diversification with marginal holdings is also not good for funds. But that's a different story.