401(k) Participants Trade Less as Markets Stabilize

Participants in defined contribution plans were light traders in November, with only two days of above-normal transfer activity, according to the Aon Hewitt 401(k) Index.

This is a sharp contrast to October, which had seven above-normal days of trading, most of which were early in the month, following a sharp but short-lived increase in volatility in U.S. and global markets. However, November transfer activity was in line with the rest of 2014. Overall, November saw 0.023% of total assets traded, with slightly more (53%) trading days favoring fixed-income assets over equities. Transfers away from diversified equities (equity assets excluding company stock) totaled $136 million.

On Wall Street, November was a positive month for the major asset classes. U.S. large-cap equities, as measured by the S&P 500 Index, gained 2.7% during the month. Small-cap equities underperformed their large-cap counterparts but still posted a positive return of 0.1%, as measured by the Russell 2000 Index. The Barclays U.S. Aggregate Index, a measure of the fixed income market, returned 0.7% during November. Non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, rebounded from a poor showing in October and returned 0.7% during the month.

In 401(k) plans, the asset classes with the most inflows included large U.S. equity funds with $150 million (42% of all asset trades), bond funds with $63 million (18%) and money market funds receiving $39 million (11%).

Company stock funds led the net outflow activity with $228 million (64%), followed by small U.S. equity with $59 million (17%) and GIC/Stable with $35 million (10%).

After incorporating trading and market activity, participants’ overall allocation to equities increased slightly to 66.0% from 65.7% in November. Future contributions to equities decreased marginally to 66.3% from 66.4%.