September 401(k) Transfers Still Tilted Towards Fixed Income

The latest data from the Aon Hewitt 401(k) Index for September indicates that asset movement slightly favored fixed income, despite the strength of equity markets during the month.

An Aon Hewitt news release said that $54 million (0.05% of total assets) moved out of diversified equities into fixed income, excluding company stock transfers.

However, when viewed with company stock, transfers were strongly fixed income-oriented. The news release said a total of $408 million moved out of equities, with the $354 million being pulled out of company stock representing nearly three-quarters of flows for the month.

On the other hand, GIC/stable value funds received the majority of the transfers, with $294 million shifting into this asset class.

Aon Hewitt said that in spite of an overall positive market during the third quarter, $560 million moved out of diversified equities and into fixed income investments. Including company stock, over $1.2 billion shifted out of equity funds.

The biggest loser of the quarter was company stock, with a total of $643 million transferring out of these funds (representing 4.4% of assets in this asset class), followed by large U.S. equity funds (outflows of $439 million) and small U.S. equity funds (outflows of $175 million).

GIC/stable value and bond are the asset classes with the largest inflows for the quarter. GIC/stable value funds received $587 million. Bond funds had inflows of $552 million during the third quarter, Aon Hewitt said.


Transfer Volume Dips

As for the volume of transfers, September was slightly lower than the 12-month trailing average with only 0.03% of balances transferred on a net daily basis during the month and just two of the days in the month had an above-normal level of transfer activity. In total, six days of the quarter had transfer activity higher than normal, which was significantly lower than the second quarter (16 above-average days).

Participants' overall equity holdings increased significantly due to positive market movement — up 1.5% to 57.9% by the end of September. For the quarter, change in overall level was also positive, although most of the movement occurred during September. On the other hand, employee-only equity contributions decreased 0.3%, from 59.9% at the end of August to 59.6% at the end of September. For the quarter, they were down 0.7%.

The news release said during the month, the Dow Jones Industrial Average rose 7.85%, the Russell 2000 by 12.46%, and the S&P 500 by 8.92%.