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TDFs a Big Draw for Contributions, Fund Transfers

Target-date funds continued to receive the majority of new contributions into individuals’ accounts last month, according to the AonHewitt 401(k) Index.

In March that meant that $498 million, or 36% of the total contributions, went into TDFs, followed by large U.S. equity funds, which drew 20% of the total, or $274 million.

As for transfers, TDFs (15%, or $48 million) were in the top three most popular asset classes for inflows, behind international (38%, or $118 million) and mid U.S. equity (16%, or $50 million). The most common classes for outflows were company stock (30% or $93 million), GIC/stable value (30%, or $93 million) and specialty/sector funds (17%, or $53 million). 

March was another light trading month for participants in DC plans, with participants transferring, on average, 0.029% of balances each day during the month — although five days in March experienced above-normal trading activity (compared with 12 days in the whole of the first quarter).

In fact, according to the index, total transfer activity for the first quarter of 2015 was 0.31% — the lowest quarterly figure since 1998, and approximately half the level of the previous quarter (0.59%). 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. 

In March, participants preferred equities slightly over fixed income, with 12 out of 21 trading days favoring equity funds. 

The Aon Hewitt 401(k) Index tracks the 401(k) trading activities of nearly 1.3 million participants, representing nearly $160 billion in collective assets.