October Turns Out To Be a Big Month for Participant Transfers

Six of the top 11 worst market declines have happened during the month of October, and while most market indices trended higher this October, it was still a busy month for participant transfers.

Overall, nearly $400 million of 401(k) balances transferred in the month, representing roughly 0.25% of total assets — both record highs for the year.

In the heaviest participant trading month since May 2013, bond funds gained $176 million (44% of all asset trades), GIC/stable value funds received $119 million (30%) while money market funds took in $65 million (16%), according to the Aon Hewitt 401(k) Index. Those transfers came from company stock funds, which led the net outflow activity with $110 million (27%), followed by small U.S. equity and mid U.S. equity with $102 million (26%) and $85 million (21%), respectively. Lifestyle/premixed funds lost $78 million (20%).

All but one of the seven above-normal trading days in October (there have only been 19 all year) had participants favoring fixed income funds over equities. Fixed income assets were favored over equities on 57% of the trading days in October. Transfers away from diversified equities (equity assets excluding company stock) totaled $228 million.

For the Aon Hewitt 401(k) Index, 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. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity.