In December, the daily average of total defined contribution plan balances transferred was just 0.027%, compared to a daily average of 0.035% of total balances over the past 12 months. Only two days in December saw trading volume exceed the trailing 12-month daily average.
While the markets were mixed, the direction of transfers and total assets moved heavily favored fixed income investments (including bonds, stable value and money market), as 71% of the days experienced net fixed income transfers, and only 29% of days had a net flow towards equities. This amounts to $218 million transferring out of diversified equities (equities excluding company stock), which is high considering the low volume of transfer activity for December.
All equity-based asset classes had net outflows during December. Even though Large U.S. Equity stocks had a strong rally for the month, this asset class saw the largest net outflow, at $78 million. International funds and Small U.S. Equity also experienced significant outflows of $63 million and $44 million transferring out, respectively.
Fixed income asset classes all experienced gains for the month. Bond funds had $169 million of inflows from transfer activity, which was by far the largest movement. GIC/Stable Value also saw $47 million transferred in, and Money Market flows were $9 million.
Participants’ discretionary contributions, a gauge of sentiment, also moved away from equities, with the overall allocation directed to stock funds down from 60.8% in November to 59.7% in December.
Fixed income asset classes now hold 41.7% of total assets, with 58.3% in equities. This is explained by the transfer activity flowing toward fixed income assets since the market indices show a mix of gains and losses that translate to a negligible effect on asset allocation, Aon Hewitt said.