A new report suggests that 2015 might have been the lightest DC participant trading year on record – and that target-date funds may have played a role.
According to the Aon Hewitt 401(k) Index, just 1.52% of balances were transferred in 2015 – well below the historical average of 2.88%. There were 39 days of “above-normal” daily transfer activity in 2015, although that was in line with the average number of above-normal days over the past 5 years (35) and past 10 years (35).
As of year-end 2015, TDFs represented 23.1% of total assets, slightly edging out Large U.S. Equity (22.7%).
Where Transfers Went
When the nearly 1.3 million participants tracked by the Aon Hewitt 401(k) Index did transfer funds, they tended to favor fixed income funds over equity instruments. GIC/stable value funds received the most inflows (41%) while the majority of outflows came from TDFs (37%) and company stock (30%).
TDFs garnered the most contributions during 2015 – 42% of the total ($498 million).
After reflecting contributions, trades, fund changes, and market activity, participants ended the year with 65.4% in equities – a decrease from 66.4% of assets invested in equities at the end of 2014.
February Activity
February was a slow trading month for 401(k) plan participants with a daily trading average of 0.024% of balances – down from 0.034% in January, according to the Aon Hewitt 401(k) Index. There was one day of above-normal trading activity.
When trading occurred, participants’ heavily favored fixed income (bond funds drew 58%, GIC/Stable Value drew 28%), while 30% of the outflows were from TDFs, just ahead of the 26% pulled from company stock. Fourteen out of 20 of trading days showed more inflows to fixed income.
