Transferring Participants Have a Fixed Sense in February

Despite the positive stock market performance during the month, participants inclined to transfer demonstrated a strong disposition toward fixed income options, according to the results of the Hewitt 401(k) Index.  According to an announcement, approximately $285 million moved from equities to fixed income investments during the month, and 70% of the days during the trading-shortened (19 trading days) month experienced fixed income-oriented transfers. 

Hewitt notes that both GIC/stable value funds and bond funds received large inflows during the month; the former category pulling nearly half (47%) of the inflows, with $148 million transferring into this asset class. Bond funds received net transfers of $116 million, 37% of the inflows.

In contrast, both large U.S. equity and international funds had outflows of $110 million, followed by company stock ($39 million) and emerging market funds ($24 million).

On average, just 0.04% of balances transferred on a net daily basis in February, though there were only two above normal⁽¹⁾-levels of transfer activity – and that on two consecutive days during the month (February 5 and 8)  – directly following a substantial market drop.  On those days, trading was approximately twice and one-and-a-half times the normal transfer volumes.

Allocation Assets

Despite those moves – and doubtless aided by the market’s rebound, participants’ overall allocation to equity investments was 58.1% at the end of February, marginally higher than the 57.8% at the end of January (see Market Continues to Move Participants).  That said, stable value continued to be the single largest holding, representing 26.3% of the overall portfolio.  Other significant allocations included:      

• 17.16% – large US equity
• 14.51% – company stock
• 11.46% – lifestyle/premix
• 6.87% – international
• 5.94% – bond
• 5.37% – balanced

In terms of the way participants allocated their discretionary contributions (participant only contributions), the allocation to equity funds was 60.0% in February, which represented a slight decrease of 0.4% from the previous month.

——————————————————     

⁽¹⁾ According to Hewitt, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds 2 times the average daily net activity. 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.