A Hewitt news release said participant December transfers favored equities 65% of the trading days with a total of $50 million moved out of fixed income and into diversified equity vehicles during the month. December’s showing was in contrast to 401(k) transfer activities the month before when participants moved assets out of equities and into fixed-income investments on 76% of the days of the month.
Overall, however, December trading activity was comparatively quiet with only a single above-normal trading day. An average 0.003% of balances shifted on a net basis per day – below the 12-month 0.04% trailing average.
According to the Hewitt data, 33.8% of the transferring money in December moved into Lifestyle/Pre-Mix while 22.4% was transferred into Balanced funds.
On a year-end basis, participants moved a modest 0.04% of their 401(k) assets daily but had more above-normal transfer days during 2007 than any of the past four years, Hewitt said. During 2007, 41 days had transfer activity exceeding the trailing 12-month average, compared to 28 days in 2006, 22 days in 2005 and 2004, and only eight days in 2003, the company said.
Focusing on the equity markets, Hewitt said 401(k) participants had a strong international flavor to their transactions by favoring international equity funds over those trading in domestic equities. In fact, assets were consistently moved out of domestic equities (large U.S. equity, small U.S. equity, and company stock) into either international equities or fixed income investments throughout the year.
With the MSCI EAFE Index gaining twice as much as the S&P 500 Index during 2007, participants transferred $1.2 billion into international equities during the year, which added up to a total of $4.2 billion of inflows to this asset class since 2002, Hewitt said. As a result, the average allocation to international equities went up to 9.8% by the end 2007 — an almost 2% increase from the end of 2006.
GIC/stable value funds benefited from inflows almost as much as international funds throughout the year. Nearly $1.2 billion moved to GIC/stable value funds, which was the highest level of inflows to this asset class since 2003. Other fixed income asset classes also received inflows for the year – $659 million shifted into bond and $352 million into money market, Hewitt said.
Both large U.S. equity and small U.S. equity experienced net outflows for the year – $574 million and $605 million, respectively. Again, company stock was the biggest loser of the year with $2.9 billion transferring out of this asset class. It is the largest amount of yearly net outflows for this asset class since the beginning of the 401(k) Index.
By the end of the year, participants’ total equity allocation declined to 66.9%, dropping back 1.7% from the beginning of the year. This was mostly due to the significant drop in company stock exposure (down 4.3%).
On the other hand, participants’ discretionary contributions to equity went up slightly from 67.5% at the end of 2006 to 68.4% at the end of 2007. Hewitt said 20.3% of the participant-only money went into Lifestyle/Pre-Mix.
The full December report is available here.