Data & Research October 19, 2011

Participant Transfers Almost Neutral in September

Despite steep losses in the stock market in September, net 401(k) participant transfers were very modest, according to the Aon Hewitt 401(k) Index Observations report.
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On average, 0.03% of balances transferred on any given day, reports Aon Hewitt. This is in line with the trailing 12-month average daily net transfer activity levels.  

The direction of transfers was almost neutral for the month. Although 401(k) participants moved their account balances out of fixed income funds and into equities on a majority of days (57%), the net dollars transferred went the opposite direction. A total of $60 million was transferred out of equities and into fixed income investments, representing 0.05% of total assets.  

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For the quarter, transfers were strongly fixed income oriented. A total of $1.4 billion moved out of equities and into fixed income investments, which represented 1.1% of total assets. The vast majority of these transfers took place in July ($946 million) and August ($432 million), according to Aon Hewitt data.   

Nearly all equity asset classes saw some outflows. Small U.S. equity funds saw the largest outflows in September, totaling $41 million. For the quarter, they lost $321. Premixed portfolios had $34 million of outflows for the month and $268 million for the quarter.  

401(k) participants also moved away from large U.S. equity funds and international funds. Large U.S. equity funds lost $25 million in September and $472 million for the quarter. International funds had $14 million transferring out for the month, and $243 million during the third quarter.  

Fixed income asset classes received most of the net transfers. Bond funds received the largest amount of inflows in September, with $106 million moving to this asset class. For the quarter, $383 million flowed into bond funds. Stable value funds and money market funds also received $1 billion and $145 million for the quarter, respectively.    

Participants’ overall equity allocation was down 1.8% from 58.7% to 56.9%. Aon Hewitt said this was mainly due to the significant loss in the stock market.  

Participant discretionary contributions to equities (employee only contributions) also declined slightly from 62.1% to 61.9% in September.  

Aon Hewitt’s 401(k) Index Observations can be found here.

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