DC Plan Trading Activity Picked Up in January

Overall, Aon Hewitt finds 0.027% of total DC assets traded in January. The majority of days (75%) favored equities over fixed-income assets, the index shows, which is the highest percentage of days per month favoring equities in two years.

As explained by Aon Hewitt, a “normal” level of relative transfer activity is 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.

Index results also show participants widely made trades out of stable value, money market funds and target-date funds (TDFs) and transferred into bonds, company stock and specialty/sector funds. Despite the slight slowdown, TDFs continue to receive the majority of new contributions into individuals’ accounts. Large U.S. equities received 19% of contributions during the month, followed by stable value funds, with 8% of the monthly contributions for January.

Combining contributions, trades and market activity, participants’ overall allocation to equities decreased to 65.6% from 66.4% in January. Future contributions to equities increased marginally month-over-month, from 66.1% to 66.4%.

The index shows the global equity markets had an unstable start to the year. The S&P 500 Index had its worst monthly showing since January 2014, returning -3.0%. Small-cap equities also had a rough month as the Russell 2000 Index returned -3.2%. Non-U.S. equities performed better than their U.S. counterparts during January but still declined, Aon Hewitt says, returning -0.2%. The Barclays U.S. Aggregate Index, a measure of the fixed income market, returned 2.1% during the month.

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