2014 Closed With Light DC Plan Trading

When participants made trades, they were most likely to sell out of premixed funds, small U.S. equity funds and company stock. The asset classes with the most inflows for the month were large U.S. equity, international funds, and balanced funds.

After incorporating December’s contributions, trades, and market activity, the overall DC participant allocation to equities increased slightly from 66.0% in November to 66.4% in December, according to the Aon Hewitt 401(k) Index. Future contributions to equities decreased marginally month-over-month, from 66.3% to 66.1%.

U.S. equities posted mixed results during the last month of 2014. On the large-cap U.S. equity front, as measured by the S&P 500 Index, returns were negative at -0.3%. Small-cap equities outperformed their large-cap counterparts, with the Russell 2000 Index gaining 2.9% during the month.

The fixed-income market, as measured by the Barclays U.S. Aggregate Index, was flat, returning 0.1%. The MSCI All Country World ex-U.S. Index, a benchmark used to represent companies based in the developed markets outside of the U.S., had a poor showing in December, returning -3.6%.

Even with the low volume of activity in December, Aon Hewitt says the last quarter of 2014 was “easily the heaviest trading quarter of 2014,” featuring 11 of the 24 above-normal trade volume days that occurred during the year. Aon Hewitt defines a “normal” level of relative DC account transfer activity as when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Aon Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. Slightly more than half (52%) of all trading days for 2014 favored fixed-income funds.

The domestic equity markets performed well during the fourth quarter, Aon Hewitt says, as both the S&P 500 Index and the Russell 2000 Index posted positive results, returning 4.9% and 9.7%, respectively. U.S. bonds also posted positive results over the trailing three month period, as the Barclays Aggregate Index gained 1.8%. The MSCI All Country World ex-U.S. Index had a volatile quarter and returned -3.9% during the period.