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Participant Equity Allocations Rising, but Slowly
Participants in 401(k) plans continued a cautious move into equity during August, with a total of $203 million shifted from fixed income into equities, according to the Hewitt 401(k) Index.
Hewitt said transfer activities were equity-oriented on 62% of the days during the month, and many equity asset classes realized net inflows during the month. Premixed funds, including target-risk and target-date portfolios, received approximately one-third of the net transfers, with $147 million moving into this asset class.
International funds were also at the top of the list at $80 million, as the MSCI EAFE Index returned 5.4% in August. Both small U.S. equity and large U.S. equity received small net inflows.
Stable value funds experienced the largest outflows of the month, with nearly $300 million transferring out, representing 65% of the net transfers. Since April, those funds have had outflows of nearly $1 billion, according to Hewitt. Company stock funds represented the remaining outflows ($138 million) in August.
Participants’ overall equity holdings were up again by 0.9% in August to 56.2%, which Hewitt said was due primarily to market movement and, to a smaller extent, participant transfers. While equity allocations have continued to rise since February, they remain well below previous levels, as one year ago, the average equity allocation was 62%.
Overall, transfer activity was fairly light in August, as it has been since April. On a typical day in August, net transfer activity averaged 0.04% of balances. Only one day in the month had an above-normal level of transfer activity.
August 401(k) Contribution Activity
Employee-only contributions
to equity funds edged up 0.3% from 57.6% at the end of July to 57.9% at
the end of August, according to the Hewitt 401(k) Index. However,
similar to overall equity holdings, the amount of employee-only
contributions going into equity is still significantly lower as
compared to August 2008 (63%).
Stable value funds took in the
most employee-only contributions at 22.01%, followed closely by
premixed funds, which took in 21.78% of employee contributions. Large
U.S. equity took in 16.95% of employee contributions in August.
International
equity funds (8.03%) and company stock funds (7.38%) rounded out the
top five investment choices for employee-only contributions.
Premixed
funds received the most overall contributions in August (21.10%),
followed by stable value funds (20.33%), and large U.S. equity
(15.67%). Company stock funds received 13.66% of overall contributions
during the month.
The August 2009 Hewitt 401(k) Index data is
here.