The Markets June 8, 2010
401(k) Participants Retreat from Equities in May
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.
Reported by PLANADVISER staff
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.Participants Still Contribute to Equities
401(k) participants’ equity contributions were nearly unchanged at 61.1% at the end of May, according to the results of the Hewitt 401(k) Index.
Lifestyle/premixed funds took in more than a quarter of employee-only contributions, while GIC/stable value funds pulled in 18%, and Large U.S. equities received 17%. Seven percent of employee-only contributions went into company stock funds.
Overall contributions followed a similar pattern with 24.75% going into Lifestyle/premixed funds, 17% into GIC/stable value funds, and 16% into Large U.S. equities. Company stock funds received 11.96% of overall contributions.
However, due to both market declines and participant transfers, the overall equity allocation of the 401(k) index was down significantly from 59.5% at the end of April to 57.3% at the end of May.
The Hewitt 401(k) Index for May 2010 is here.
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.Participants Still Contribute to Equities
401(k) participants’ equity contributions were nearly unchanged at 61.1% at the end of May, according to the results of the Hewitt 401(k) Index.
Lifestyle/premixed funds took in more than a quarter of employee-only contributions, while GIC/stable value funds pulled in 18%, and Large U.S. equities received 17%. Seven percent of employee-only contributions went into company stock funds.
Overall contributions followed a similar pattern with 24.75% going into Lifestyle/premixed funds, 17% into GIC/stable value funds, and 16% into Large U.S. equities. Company stock funds received 11.96% of overall contributions.
However, due to both market declines and participant transfers, the overall equity allocation of the 401(k) index was down significantly from 59.5% at the end of April to 57.3% at the end of May.
The Hewitt 401(k) Index for May 2010 is here.