Following a year that saw the lowest trading in nearly a quarter century, the war in Ukraine and related market volatility has resulted in another busy trading month for 401(k) investors.
As international political events drove Wall Street lower, 401(k) investors reacted with above-normal trading activity, according to Alight Solution’s February 401(k) Index, which tracks the 401(k)-trading activity of over 2 million people with more than $200 billion in collective assets.
There were six above-normal trading days in February, and high activity continued into March, according to data shared by the firm. As of the end of February, there were 11 above-normal days. There were only three above-normal trading days in all of 2021. 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.
On average, 0.02% of 401(k) balances were traded daily in February, eclipsing January’s daily trading levels, which at the time were the highest levels in more than a year.
Net trading saw investors moving assets into fixed income over equity, as 14 of 19 trading days favored fixed income funds.
Inflows and Outflows
Trading inflows for February went mainly to stable value, money market and bond funds, while outflows were primarily from target date, large U.S. equity and small U.S. equity funds.
Like January, stable value funds collected the highest percentage of trading inflows for the month, at 76% for an index dollar value of $464 million, while 14% went to money market funds (or $87 million) and 7% went to bond funds (or $41 million), according to Alight’s data.
Asset classes with the most trading outflows for February went to target date funds, at 41% for an index value of $251 million, followed by large U.S. equity funds at 36% (or $220 million) and small U.S. equity funds at 6% ($38 million).
After reflecting market movements and trading activity, the average asset allocation in equities decreased from 70% in January to 69.5% in February. Meanwhile, new contributions to equities decreased from 70.1% in January to 69.5%.
Asset classes with most contributions in February included target date funds, at 45% for an index value of $730 million, followed by large U.S. equity funds at 22% (or $355 million) and international equity funds at 7% (or $122 million).
Market Performance
As to market returns for common indices, U.S. bonds (represented by the represented by the Bloomberg U.S. Aggregate Bond Index) were down -1.12% for the month of February; U.S. large equity (represented by the S&P 500 Index) was -2.99%; U.S. small equity (represented by the Russell 2000 Index) was 1.07%; and international equity (represented by the MSCI All Country World ex-U.S. Index) was -1.98%. All of these indices have negative year-to-date returns as of the end of February.
