Investors Fled to Stable Value, Money Markets in March

The stock market fell throughout March, spurring 401(k) investors to trade at record-high levels, according to the Alight Solutions 401(k) Index. Total transfers as a percentage of the starting balance were the highest since October 2008. March had 18 above-normal days of trading activity—the most above-normal days in a month in the more than 20-year history of the 401(k) Index.

Retirement plan investors traded 0.96% of their starting balances during the month. Year to date, they have traded 1.59% of their balances.

Asset classes with the most trading inflows in March were stable value funds, which took in 64% of the inflows, valued at $1.29 billion. That was followed by money market funds (24%; $482 million) and bond funds (6%; $119 million).

Asset classes with the most trading outflows in March were target-date funds (TDFs) (48%; $974 million), large U.S. equity funds (29%; $591 million) and international equity funds (6%; $122 million).

The average asset allocation in equities dropped from 66% in February to 63.1% in March.

Asset classes with the largest percentage of the total balance at the end of March were target-date funds (29%; $59.97 billion), large U.S. equity funds (24%; $45.17 billion) and stable value funds (12%; $22.79 billion).

Asset classes with the most contributions in March were target-date funds (44%; $830 million), large U.S. equity funds (21%; $407 million) and international equity funds (8%; $144 million).

Large U.S. equities lost 12.4% of their value. International equities dropped 14.5%, and small U.S. equities sank 21.7%. U.S. bonds dipped slightly by 0.6%.

With the markets plummeting at the end of February over fears of the repercussions of a worldwide coronavirus outbreak, 401(k) investors’ trades spiked in the final week of the month—marking it as one of the busiest five-day stretches in the 20-year-plus history of the Alight Solutions 401(k) Index.

During the month, 0.046% of 401(k) balances were traded daily, the highest level since August 2011. In particular, the net trading activity on February 28 was 15.8 times the average daily level, which surpassed the previous high of 11.8 times the average, set in February 2018.

The last week of February had more net trading activity than all the combined activity in the fourth quarter of 2019. Sixteen of the 19 trading days in the month favored fixed income funds. Asset classes with the most trading inflows in February were bond funds, taking in 47% of the inflows, valued at $687 million, followed by stable value funds (41% and $597 million) and money market funds (11% and $160 million).