July Sees Light DC Trading Activity

July was light in trading activity for defined contribution plans, with only 0.019% of balances transferring, according to Aon Hewitt’s 401(k) Index.

This marked the ninth consecutive month that trading activity was below 0.03%. The index also shows that total transfer activity was $291 million, with only one day in July having above-normal trading activity. The Aon Hewitt index 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 year.

When trading occurred, notes the index, plan participants favored equity funds over fixed-income funds for 64% of the trading days. This was the first time since January that the month had a majority of equity-favored days.

July also saw international funds receiving the most inflows with $107 million (37%), followed by premixed funds at $70 million (24%), and money market funds with $64 million (22%). The funds with the most outflows were stable value/GIC funds with $96 million (33%), small U.S. equity funds with $79 million (27%), and bond funds with $49 million (17%).

Equity market performance during July was mixed, with emerging markets posting positive results and developed markets experiencing losses. The MSCI Emerging Markets Index (a measure of companies based in emerging markets) posted a positive 2.1% return, while the MSCI EAFE Index (a measure of companies based in developed markets outside of the United States) fell by close to 2%. The Russell 2000 Index (a measure of U.S. small cap companies) fell -6.1% and the S&P 500 (a measure of U.S. large cap companies) fell 1.4% throughout the month. The Barclays U.S. Aggregate Index (a measure of the U.S. fixed income market), fell 0.3% during the month.

After incorporating trading and market activity, participants’ overall allocation to equities at the end of July remained unchanged at 65.5%. Expected future contributions to equities decreased marginally to 66.5% from 66.6%.