DC Participants Traded Lightly In May

Defined contribution (DC) plan participants bucked the stock market adage of “sell in May and stay away,” continuing recent trends with a light trading month in May, says Aon Hewitt’s 401(k) Index.

The average daily transfer volume was 0.024% of balances, identical to April’s value and well below historical levels, finds the index. May also marked the seventh consecutive month that trading activity was below 0.03%. Typically, the average monthly trading activity has been close to 0.05% since Aon Hewitt began tracking this data in 1997. Total transfer activity across the index was $396 million (0.25%) with one day in May with above normal activity.

Aon Hewitt defines a normal level of relative transfer activity 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.

The index also shows that when trading occurred, DC participants favored fixed-income funds for 62% of trading days in May, which is down from 67% in April. Overall, net transfer activity moved away from diversified equities (equity assets excluding company stock) by $62 million (0.04%).

Bond funds received the most inflows in May with $151 million (38%), followed by international funds with gains of $88 million (22%), and premixed funds with $75 million (19%). Most equity-based asset classes had net outflows in May. Leading the way, small U.S. equity funds lost $159 million (40%), followed by company stock $105 million (27%), and mid-U.S. equity funds $81 million (21%) transferring out.

On average, participants’ overall equity allocation for May remained the same as April at 65.4%. Employee contributions to equities remained unchanged as well at 66.6%.

The global equity markets continued their upward trend during the month of May. They were led by the emerging equity markets as the MSCI Emerging Markets Index gained 3.5% during the month. U.S. equities, as measured by the S&P 500, returned 2.3% while non-U.S. Equities, as measured by the MSCI All Country World ex-U.S. Index, returned 2.0%. The Barclays U.S. Aggregate Index posted its second positive month in a row, returning 1.1% during May as the 10-year Treasury yield decreased to 2.48%.