Participants Continue Tiptoeing into Equities

Total transfers for the month of September were again equity-oriented. However, flows overall have been relatively small, as only 1% of total assets have shifted from fixed income to equity investments since April 2009, compared to the 6% of assets that moved the other direction between January 2008 and March 2009.

The Hewitt data showed that in September, a total of $138 million moved from fixed income to equities. Nearly 70% of the transfers came from stable value funds, which lost $232 million in net transfers in September and $448 million for the quarter.

During the third quarter, $577 million moved into diversified equities (equities excluding company stock). However, after including company stock, the total equity inflows were $87 million due to large outflows from company stock funds. The biggest loser of the quarter was company stock, with a total of $490 million transferring out of these funds.

Bond, lifestyle, and international funds were the asset classes with the largest inflows in September and for the quarter. Bond funds received $104 million in September and $273 million for the quarter. Lifestyle funds had inflows of $82 million in September and $300 million during the third quarter. International funds received $75 million in September and $193 million for the quarter.

September showed the lowest participant activity level in 401(k) plans so far this year, Hewitt said. Only 0.03% of balances transferred on a net daily basis, and none of the days in the month had an above-normal level of transfer activity.

Contribution Data

Participant-only equity contributions increased 0.7%, from 57.9% at the end of August to 58.6% at the end of September, according to the Hewitt 401(k) Index. For the quarter, they were up 1.8%.

Lifestyle/pre-mix funds received 23.11% of total participant contributions during the month, while GIC/stable value funds took in 21.67% and large U.S. equity funds received 16.93%.

The bulk of overall 401(k) contributions also went into lifestyle/pre-mix funds (22.51%), GIC stable value funds (19.92%), and large U.S. equity funds (15.66%).

Participants' overall equity holdings increased 1% to 57.2% by the end of September. It was up 3.6% for the quarter, primarily due to strong stock market returns, according to Hewitt.

The index results are available here.