The index found the overall daily transfer volume in March averaged 0.021% of the total daily balances, slightly lower than February’s value of 0.023%. In addition, there were zero days in March with above normal transfer activity levels, marking the first month of zero above normal trading days since August 2013. Total transfer activity across the index was low, at $244 million (0.15%).
In this context, the normal levels are defined by the index as when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
When DC participants did trade in March, they favored fixed income funds. Fifty-seven percent of trading days were fixed income oriented. Overall, net transfer activity moved away from diversified equities (equity assets excluding company stock) by $160 million (0.10%).
The asset classes that experienced net inflows during March include premixed portfolio funds, with gains of $70 million (29%), and bond funds with a gain of $36 million (15%). Next in line were international funds, with $29 million (12%) of the monthly inflows, and small cap U.S. equity funds received $23 million (10%). Company stock funds again lead the net outflow activity, with $208 million (86%) transferring out, followed by GIC/stable value funds, with $13 million (6%), and money market funds, with $12 million (5%) transferring out.
On average, participants’ overall equity allocation remained at 65.5% at the end of March, unchanged from the value in February. Employee discretionary contributions to equities, another measure of participant sentiment, were also virtually unchanged at 66.6%, compared to 66.5% in February.
Aon Hewitt noted that emerging equity markets outperformed the developed equity markets during March. The MSCI Emerging Markets Index posted strong performance for the second consecutive month, returning 3.1% during March on top of its 3.3% gain in February. Equities, both U.S. and non-U.S., also had positive performance as the S&P 500 Index returned 0.8% and the MSCI All Country World ex-U.S. Index gained 0.3%. The fixed income markets, as measured by the Barclays U.S. Aggregate Index, decreased by 0.2% during March.
For the first quarter of 2014, $393 million total net transfer activity moved into diversified equities. As a percentage of total participant balances, the quarter totaled 0.25%.
During the first quarter, the S&P 500 Index hit a series of record closing highs and posted a return of 1.8%. Non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, also delivered positive performance over the first three months of the year, gaining 0.5%. Two consecutive months of positive performance for the MSCI Emerging Markets Index were not enough offset the rough start it had in January, with the MSCI Index having an overall return of -0.4% during the quarter. The Barclays Capital Aggregate Bond Index returned 1.8% during the quarter, as the yield on the 10-year Treasury fell by more than 25 basis points.
More information about the March results for the Aon Hewitt 401(k) Index can be found here.