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Premixed Funds Lead Fund Outflows in Slow Trading Month

Participant transfers closed out the busiest trading quarter of 2014 on a quiet note, according to a new report.

In December, there were only two days of “above normal” trading volume among DC plan participants tracked by Aon Hewitt’s 401(k) Index. Overall, just 0.022% of total assets were traded in December, with a slight preference (55%) of days favoring equities over fixed income assets.  

Among those who did make a move, over half of the outflows (53%) — some $141 million — came from “premixed” funds, such as target-date funds, with movements from small-cap U.S. equity funds comprising another quarter (24%) of the total, and 14% coming from company stock. Most of that money moved into large-cap U.S. stock funds (52%, $137 million), international funds (15%, $39 million) and balanced funds (10%, $27 million).  

However, the quarter ending Dec. 31 was easily the heaviest trading quarter of 2014, with 11 of the 23 above-normal days that occurred during the year. On the year, participants who traded were torn between stocks and bonds; just over half (52%) of all trading days favored fixed income funds.  

That said, 2014 was relatively quiet in comparison to 2013, when 47 days had above-normal daily transfer activity and 2.71% of participants’ balances ($3.67 billion) moved between funds on a net basis, more than any year since 2008.

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.