Participants Continue Tiptoeing into Equities

The Hewitt 401(k) Index for September indicated 401(k) participants continued to slowly and modestly transfer assets from fixed income investments back into equities.

Total transfers for the month of September were again equity-oriented. However, flows overall have been relatively small, as only 1% of total assets have shifted from fixed income to equity investments since April 2009, compared to the 6% of assets that moved the other direction between January 2008 and March 2009.

The Hewitt data showed that in September, a total of $138 million moved from fixed income to equities. Nearly 70% of the transfers came from stable value funds, which lost $232 million in net transfers in September and $448 million for the quarter.

During the third quarter, $577 million moved into diversified equities (equities excluding company stock). However, after including company stock, the total equity inflows were $87 million due to large outflows from company stock funds. The biggest loser of the quarter was company stock, with a total of $490 million transferring out of these funds.

Bond, lifestyle, and international funds were the asset classes with the largest inflows in September and for the quarter. Bond funds received $104 million in September and $273 million for the quarter. Lifestyle funds had inflows of $82 million in September and $300 million during the third quarter. International funds received $75 million in September and $193 million for the quarter.

September showed the lowest participant activity level in 401(k) plans so far this year, Hewitt said. Only 0.03% of balances transferred on a net daily basis, and none of the days in the month had an above-normal level of transfer activity.

Contribution Data

Participant-only equity contributions increased 0.7%, from 57.9% at the end of August to 58.6% at the end of September, according to the Hewitt 401(k) Index. For the quarter, they were up 1.8%.

Lifestyle/pre-mix funds received 23.11% of total participant contributions during the month, while GIC/stable value funds took in 21.67% and large U.S. equity funds received 16.93%.

The bulk of overall 401(k) contributions also went into lifestyle/pre-mix funds (22.51%), GIC stable value funds (19.92%), and large U.S. equity funds (15.66%).

Participants' overall equity holdings increased 1% to 57.2% by the end of September. It was up 3.6% for the quarter, primarily due to strong stock market returns, according to Hewitt.

The index results are available here.