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September Swoon Sends Flows to Fixed

In another rough month for stocks, those who transferred their 401(k) balances headed for the relative security of fixed income offerings, notably GIC/stable value.

Indeed, according to the Aon Hewitt 401(k) Index, fixed income funds were the only asset class with positive net inflows during September — a month in which 81% of the trading day movements favored fixed income, the highest ratio of days to fixed income funds in two years.

Doubtless inspired by the markets’ volatility, September also had four days of above-normal trading activity, the highest number of above-normal days in a month since May. On average, participants transferred 0.026% of total balances in September.

Once again, target-date funds topped the outflows category, representing 41% of the net outflows ($166 million) in the Aon Hewitt 401(k) Index, which tracks the activity of nearly 1.3 million participants, representing nearly $160 billion in collective assets. Large U.S. equity funds (23%) and company stock (17%) rounded out the top three, while GIC/stable value (69%), money market funds (17%) and bond funds (13%) were the top three recipient asset categories.

Target-date funds continued to dominate new contribution flow, garnering 40% of contributions, followed by large U.S. equity funds (19%).

In August, an average of 0.026% of total balances transferred, slightly higher than the averages for July (0.021%) and June (0.024%) — but still less than May’s average of 0.031%.

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.

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