Participant Transfer Activity Significantly Higher in October

Ten days of the month experienced above normal level of transfer activities. On average, 0.10% of balances were transferred on a net daily basis—twice as much as the trailing average of the past 12 months. Hewitt said the last time the index had such high level of transfers was in late 2002.

In addition, a total of 1.25% of balances was transferred on a net basis during October—2.7 times the historical average (0.46%).

Flight to Fixed Income

In dollar terms, the direction of the transfers were strongly fixed-income-oriented during October, as participants moved $776 million from equities to fixed-income investments. However, on a daily basis, only 57% of the days were fixed-income-oriented, according to Hewitt data.

GIC/stable value received the largest amount of inflows in October ($1 billion), which represented 76% of the net transfers for the month. Company stock funds received inflows of $233 million, followed by money market funds with $85 million.

Nearly all the equity asset classes experienced outflows. International funds were the biggest loser, with $279 million transferring out of this asset class. Lifestyle funds had $258 million moving out; followed by balanced funds with $216 million of outflows; and large U.S. equity funds, which lost $208 million.

Equity Asset Loss

Due to both negative market return and participant transfers, the overall equity allocation in the Hewitt 401(k) index dropped 5% during the month, to 53.8%, which is the lowest equity allocation since the beginning of the 401(k) index in 1997, according to Hewitt.

GIC/Stable Value held the largest share of assets at 31.84%.

GIC/Stable Value also gained the largest share of participant discretionary contributions at 22.04%, followed by Lifestyle/Pre-Mix (20.09%), and Large U.S. Equity (17.57%).

The Hewitt 401(k) Index data is available here.