October Was A Difficult Month for DC Investors

The month presented investors with several challenges, not just negative returns.

Defined Contribution (DC) plan investors went through a shaky month of generally negative equity and fixed-income returns, coupled with light trading, according to Aon Hewitt’s latest monthly analysis, “401(k) Index & Observations Monthly Details: October 2016.”

The firm reports that only 0.16% of total balances traded in the month, and there were just two days of above-normal trading activity. For participants who traded, 15 out of 21 trading days favored fixed-income funds over equity funds.

According to Aon Hewitt data, asset classes with the most trading were GIC stable value funds (36%), international funds (23%) and money market funds (20%). Funds that saw the most contributions in October were target-date funds (TDFs) and large U.S. equity funds. TDFs also held the largest percentage of balances at the end of October (24%) across the 401(k) market. Preceding TDFs were large U.S. equity funds (22%) valued at $37,549 and GIC/stable value funds (13%) valued at $22,664 million

Overall, Aon Hewitt says the month was mostly negative for investors. U.S. Small-Cap equities (represented by the Russell 2000 Index) fell close to -5%, while U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) fell close to -1%. U.S. Large-Cap equities (represented by the S&P 500 Index) fell close to -2% and International equities (represented by the MSCI All Country World ex-USA Index) fell approximately -1.5%.