Participants Favor International and Emerging Markets in October

Both international and emerging markets had very strong returns in October: the MSCI EAFE Index (international) gained nearly 4% and the MSCI Emerging Markets Free Index had a return of 11%. As a result, 401(k) participants moved nearly $240 million to international funds and $55 million to emerging markets funds. International funds have received net inflows during eight out of ten months in 2007, with a total of $1.1 billion transferring in year-to-date, Hewitt said.

As a result of the large international inflows, participant net transfer activity was primarily equity oriented on 57% of days during the month. Stable value funds experienced the largest outflows of nearly $158 million.

Lifestyle funds also received strong inflows, with $91 million moving in during October. For the year, nearly $300 million has transferred into this asset class.

Large U.S. Equity funds won 21.20% of participant-only contributions in October, and Lifestyle/Pre-Mix funds gained 19.23% of participant contributions. Participants put 15.57% of contributions into GIC/Stable Value funds during the month. Overall contributions to the three asset classes reflected a similar distribution at 18.32%, 16.33%, and 13.78%, respectively.

Large U.S. Equities still held the (20.98%) bulk of 401(k) assets at the end of October, followed by GIC/Stable Value funds with 19.83% of assets and Company Stock funds with 16.62% of assets.

The net transfer activity in October was modest, with an average of 0.04% of balances transferred on a daily basis. Three days of the month experienced above normal transfer activity, which is the lowest number of above-normal days since June, Hewitt said.

The Hewitt data is here.