Transfers Slow, But Volume Steady in Q2

“Keep calm and quit trading” appeared to be the watchwords for participants in the second quarter.

Indeed, a report of the activity in the Alight Solutions 401(k) Index found that trading activity among 401(k) investors was noticeably quieter in the second quarter of 2018 than it was in the first quarter, with just six days of above-normal trading activity in activity — down from 23 days in the prior quarter. In June, there was only one such trading day, matching May’s pace.

Alight defines 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.

On the other hand, while there were fewer trades, the aggregate amount transferred was higher; in total, 0.46% of balances were transferred in the second quarter, compared to 0.43% of balances in the first quarter.

Perhaps more significantly, more than half (38 out of 64) of trading days in the second quarter had net trading dollars moving from equities to fixed income. The first quarter, by contrast, had more than half (32 out of 61) of trading days move from fixed income to equities, according to the report.

Most of the transfers in June went toward:

  • small U.S. equity funds (41%, or $153 million)
  • mid U.S. equity funds (21%, or $78 million)
  • stable value funds (17%, or $64 million)

Target-date funds continued to top the outflows category, though in June – and for the second quarter overall – TDFs were just 36% of the total ($133 million in June, $331 million for Q2). Not surprisingly, TDFs also dominated the contributions category in June, with nearly half (46%, or $492 million) of contributions going into TDFs.

The Alight Solutions 401(k) Index tracks the market confidence and investment activity of 401(k) plan participants at large employers, with data on nearly 2 million 401(k) participants who have over $200 billion in collective assets.

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