No March Madness for Participant Transfers

There hasn’t been participant transfer activity like this since 1997.

Not that such things are generally very active, but the Aon Hewitt 401(k) Index shows that March ended an overall light quarter of trading activity by 401(k) investors. In fact, the first quarter of 2017 saw no days with above-normal trading activity — and that’s the first time this has happened in a quarter since the index was established in 1997.

According to the index, net trades for the first quarter of 2017 amounted to 0.43% of balances — the lowest level since the fourth quarter of 2015. Trading activity favored equity funds, with large U.S. equity (39%), international (29%) and emerging market funds (11%) receiving the majority of inflows. Company stock (47%) and stable value funds (30%) had the largest percentage of outflows.

A “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Aon Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

‘Light’ Speed?

March was not only a quiet month for U.S. markets, it was also a month in which 401(k) investors had the lightest month of trading activity since September 2016. Overall, net trades totaled just 0.15% of balances in March, and there were no days with above-normal trading activity.

When investors made trades, they tended to be more conservative: 18 out of 23 trading days had more inflows to fixed income.

During the month, about a third of the money that did move followed to international funds, while 20% was directed to large U.S. equity funds and another 19% to money market funds. Those transfers came from:

  • company stock funds (59%);
  • small U.S. equity funds (29%); and
  • mid U.S. equity funds 11% (11%).

New contributions (some $708 million) went to target-date funds (40%), while another $362 million (20%) went to large U.S. equity funds.

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