Another Light Trading Month for DC Participants

For April, the average daily transfer volume stood at 0.024% of participant balances. While this value is slightly higher than March’s value of 0.021%, it is well below historical daily levels, according to the index.

Since Aon Hewitt began tracking this data in 1997, average monthly trading activity has been close to 0.05%, but April marked the sixth consecutive month that trading activity was below 0.03%. Total transfer activity across the index was $349 million (0.22%), with two days in April showing above normal activity.

In this context, a normal level of relative transfer activity is defined as when the net daily movement of participants’ balances as a percent of total 401(k) balances within the index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

The index also reveals that when net transfers occurred, defined contribution plan participants favored fixed-income funds for 67% of trading days in April, up from 57% in March. Overall, net transfer activity moved away from diversified equities (i.e., equity assets excluding company stock) by $49 million, or 0.03%.

In April, the index indicates that the asset classes that experienced net inflows included bond funds, with gains of $120 million (34%), and international funds, with a gain of $111 million (32%). Next in line were large U.S. equity funds and specialty/sector funds, both with about $35 million (10%) of the monthly inflows. Company stock funds again topped the net outflow activity, with $203 million (58%) transferring out, followed by small- and mid-U.S. equity funds, with $74 million (21%) and $57 million (16%), respectively, transferring out.

On average, participants’ overall equity allocation remained at 65.4% at the end of last month, virtually unchanged from the March value of 65.5%. Employee contributions to equities declined slightly from 66.6% in March to 66.1% in April.

U.S. equities, as measured by the Standard & Poor’s (S&P) 500 Index, started out the second quarter of this year on a positive note, returning 0.7% during April. Non-U.S. equities also posted gains during the month. The MSCI All Country World ex-U.S. Index returned 1.4% during April. Although they underperformed the developed markets, emerging markets also increased during April, gaining 0.4% during the period. The fixed-income market rebounded from a poor March, returning 0.8% in April as the 10-year Treasury yield decreased slightly to 2.65%.

More information about the April results of the index can be found here.