Beachgoers weren’t the only ones taking some time off in July, as 401(k) trading activity among 401(k) plan participants logged only one above-normal day, according to the Alight Solutions 401(k) Index.
This comes following a busy second quarter, which registered the heaviest quarter of net trading since the third quarter of 2016. July also marks the 18th month in a row that net trades have flowed from equities to fixed income funds.
Alight tracks the 401(k)-trading activity of over two million people with more than $200 billion in collective assets, and issues monthly and quarterly reports detailing 401(k) trading volume, asset flows and market activity. The firm’s July 2019 observations show that on average, 0.014% of 401(k) balances were traded daily and 19 of 22 days favored fixed income funds. Overall for 2019, 126 out of 146 trading days have favored fixed income.
Total transfers as a percentage of starting balance equaled 0.17% for July and 1.26% for 2019 year-to-dates. The year-to-date data also shows that there have been 17 above-normal trading days. 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 Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
Inflows and Outflows
Trading inflows for July went mainly to bond, international equity and money market funds, while outflows were primarily from company stock, large U.S. equity and small U.S. equity funds, Alight’s data shows.
Bond funds, not surprisingly, received the lion’s share, registering at 52% with an index value of $189 million. Trailing behind were international equity funds at 14% with a value of $51 million and money market funds at 12% with a value of $43 million.
Company stock edged out large U.S. equity funds for the most trading outflows, registering at 42% (or $154 million) and 40% (or $143 million), respectively. Small U.S. equity funds trailed behind at 9% or $33 million.
After reflecting market movements and trading activity, average asset allocation in equities remained unchanged from June to July at 67.7%. New contributions to equities also remained at 67.7% – the same level as June, the report notes.
Meanwhile, new contributions in July continued to favor target-date funds, receiving 47% of the contribution pie, for an index value of $511 million. Large U.S. equity funds garnered 20% (or $220 million), while international funds drew 7% (or $79 million).
Alight also reports that capital market returns were mixed in July. Large U.S. equities (represented by the S&P 500 Index) gained 1.4%; small U.S. equities (represented by the Russell 2000 Index) returned 0.6%; and U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) rose 0.2%. In contrast, international equities (represented by the MSCI All Country World ex-U.S. Index) fell 1.2%.
The year-to-date data shows the S&P 500 Index leading the way, with 20.2% in returns, followed by the Russell 2000 Index at 17.7%, the MSCI All Country World ex-U.S. Index at 12.2% and the Bloomberg Barclays U.S. Aggregate Index at 6.4%.