November Another Light Month for 401(k) Trades

The Alight Solutions 401(k) Index update for November has been published, showing the month was another light one for defined contribution (DC) retirement plan trading.

In fact, there were no days of above-normal activity, with a “normal” level of relative transfer activity occurring when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Alight Solutions 401(k) Index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. Accordingly, a “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity, and a “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.

During November, two-thirds of days saw net trading activity favor equity funds over fixed income, the index shows. On average, net daily trading activity was 0.009% of 401(k) balances, and, after reflecting market movements and trading activity, average asset allocation in equities decreased from 70.5% in October to 70.1% in November. New contributions to equities increased from 69.2% in October to 69.7% in November.

Trading inflows mainly went to large U.S. equity, bond and international equity funds, the index shows, while outflows were primarily from stable value funds, target-date funds (TDFs) and money market funds.

In terms of new contributions, TDFs yet again secured the lion’s share, with 48% of all contributions going to TDF strategies, 21% going to large-cap U.S. equity funds and 7% to international equities. At the end of November, TDFs held 30% of all 401(k) assets, large-cap U.S. equity funds held 27% and stable value funds held 7%.

Returns were either muted or significantly negative during the month, depending on the index cited. The S&P 500 decreased 0.69% during November but finished the year-to-date at a positive 23.18%. On the other hand, the Russell 2000 Index fell sharply in November by 4.17%, leaving it with a year-to-date return of 12.31%. The MSCI All Country World ex-U.S. Index dropped by a similar 4.5% during the month, meaning it had returned a negative 4.34% year-to-date.