401(k) Investors Take Their Preference for Fixed Income to New Level

Throughout 2020, 401(k) investors have shown a preference for fixed income over equities when it comes to making trades in their accounts, according to the Alight Solutions 401(k) Index. In October, they took that to a new level.

For the first time in the more than 20-year history of the index, an entire month, October, saw net trading flows move exclusively into fixed income. There were also seven days of above-normal trading activity, the most since March.

While all 22 trading days favored fixed income over equities, 401(k) investors moved a mere 0.54% of their money into it during the month.

Asset classes with the most trading inflows in October were stable value funds, which amassed 49% of inflows valued at $603 million, followed by bond funds (39%; $472 million) and money market funds (11%; $138 million).

Asset classes with the most trading outflows in October were large U.S. equity funds (44%; $534 million), target-date funds (TDFs) (18%; $215 million) and mid-U.S. equity funds (11%; $139 million).

Reflecting market movements and trading activity, the average asset allocation in equities decreased to 65.4% in October from 66.1% in September. New contributions to equities remained at 67.2%, the same as in September.

Asset classes with the largest percentage of total balance at the end of October were TDFs (29%; $64 billion), large U.S. equity funds (25%; $55.1 billion) and stable value funds (10%; $23 billion).

Asset classes with the most contributions in October were TDFs (48%; $546 million), large U.S. equity funds (20%; $227 million) and international equity funds (7%; $78 million).

Small U.S. equities rose 2.1% in the month, while large U.S. equities fell 2.7%. International equities were also down, by 2.2%, and U.S. bonds eked downward by 0.5%.