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Participant Trading Tempo Picked Up in October

The markets were volatile in October, producing the busiest participant trading activity since February.

According to the Alight Solutions 401(k) Index, there were five days of above-normal trading activity during the month, whereas year-to-date there have been 34. 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 Alight Solutions 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 in the index, which tracks the 401(k) trading activities of nearly 2 million participants representing more than $200 billion in collective assets.

That stood in sharp contrast with the third quarter, when participant transfers did something they’ve only done twice in the past 20 years – or more precisely didn’t do something, with not a single day of above-normal trading activity. Indeed, the only other time this happened was the first quarter of 2017.

Transfers Tracked

But as for October – and perhaps not surprisingly in that environment, net trading activity overwhelmingly went from equities to fixed income funds (15 of the 23 trading days). On average, just 0.019% of 401(k) balances were traded daily, however. With regard to specific asset classes, the following drew the most inflows:

60% - stable value funds ($224 million)
17% - money market funds ($63 million)
16% - company stock ($60 million)

As for where that money came from:

51% - target date funds ($191 million)
19% - small U.S. equity funds ($70 million)
14% - mid U.S. equity funds ($52 million)

On the other hand, new contribution dollars went to:

47% - target date funds ($459 million)
20% - large U.S. equity fund ($197 million)
7% - international funds ($72 million)