June 08, 2010
--- As the Dow Jones Industrial Average slid more than 7% in May, 401(k) participant transfers became strongly fixed income-oriented, according to the results of the Hewitt 401(k) Index. ---
A total of $635 million moved from equities into fixed income investments during the month, which represented 0.55% of total assets. Eighty percent of days during the month saw fixed income-oriented transfers.
Participants reacted strongly to the downturns of the market, the data shows. On May 6, when the Dow Jones Industrial Average was down 3.2%, net transfers were strongly fixed income-oriented, in total four times the typical average, Hewitt said. Again, on May 20, volumes of transfers (fixed income-oriented) were three times the norm when markets were down 3.6%.
The three fixed income asset classes received a total of $706 million of net transfers, which represented 86% of the inflows in May. GIC/stable value and bond funds received $424 million and $248 million, respectively. Company stock funds also experienced positive inflows of $113 million.
On the other hand, all diversified equity asset classes saw net outflows. As the MSCI EAFE Index declined more than 11%, international funds had the biggest losses, with $247 million moving out of these funds. Large and small U.S. equities also experienced $195 million and $121 million in outflows, respectively, followed by lifestyle funds with $109 million.
Volumes of transfers were significantly higher than average, according to the Index. Overall, 0.06% of balances were shifted on a net daily basis, a level not seen since the first quarter of 2009. For the month, net transfers were 0.70% of total assets, considerably higher than the 0.46% average since the inception of the index.
Nine days in May had an above-normal level* of transfer activity, with two-thirds of these days being fixed income-oriented.