401(k) Investors Exit Bonds, Equity at Same Pace

Retirement plan investors seemed of two minds in October, with asset transfers out of 401(k) plans showing equal numbers favoring equities as fixed income, according to the latest data from the Hewitt 401(k) Index.

The directions of transfers were equity-oriented during half of the days in the month, and fixed-income-oriented during the remaining days. In terms of volume, Hewitt reported the October transfer activity was below the 12-month trailing average.

A net $16 million transferred from fixed-income investments into equities in October, which is significantly lower than the average net transfer between equity and fixed-income asset classes ($240 million) so far this year.

Bond funds received the largest inflows during the month, with $132 million moving into this asset class, which represented nearly 40% of the total transfer amount in October. Both lifestyle funds and international funds received $93 million and $90 million in assets, respectively.

Company stock funds had the largest outflows in October. A total of $131 million moved out of these funds during the month. GIC/stable value experienced $109 million transferring out for the month, while money market funds had outflows of $87 million.

Total equity holdings were down slightly to 56.9% at the end of October, from 57.2% at the end of September. The change is largely due to market movement.

On the other hand, participants’ overall equity contributions rose slightly during the month, from 58.6% at the end of September, to 59.3% at the end of October.

In terms of October asset allocation, Hewitt reported that 27.79% was in GIC/Stable Value, 16.68% in Large U.S. Equity, 14.61% in Company Stock, and 10.65 in Lifestyle/Pre-Mix.

Participants put 22.35% of their October contributions into Lifestyle/Pre-Mix, 20.96% into GIC/Stable Value, 16.99% on Large U.S. Equity, and 8.61% in International.

Less than 1% of balances transferred on a net daily basis during the month, compared to the average 0.04% in the past 12 months. Only one day in the month had an above-normal level of transfer activity—when the Dow Jones Industrial Average had the highest return in the month (more than 2% return on October 29), transfer activity was strongly equity-oriented, with 0.09% of balances shifting during the day.

Hewitt’s October 401(k) data is available here.