It’s too soon to know if Brexit will motivate a surge in plan transfers, but those who did move money in May were looking for some stability.
According to the Aon Hewitt 401(k) Index, May was another light month of trading activity by 401(k) investors. In total, 0.16% of balances traded in May — which is the same percentage of balances traded in April. For the month of May, there were just two days of what Aon Hewitt characterizes as above-normal trading activity — 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. That was, however, a pickup from April’s pace, where there were no above-normal trading days.
Year-to-date there have been 10 “above normal” trading days in the Aon Hewitt 401(k) index.
Bond funds captured nearly half (46%) of the inflows during the month, followed by GIC/Stable value (34%) and money market funds (13%). More than half of the outflows came from large cap U.S. equity funds (58%), with mid-cap U.S. equity funds (13%) and company stock funds (9%) yielding much of the rest. All in all, about $250 million of the nearly $160 billion tracked by the Aon Hewitt 401(k) Index was transferred by individuals in the database of some 1.3 million participants during the month.
Target-date funds, which now constitute nearly a quarter of the Aon Hewitt 401(k) Index, continued to garner the most new contribution dollars: 40% of the total, some $373 million. Large U.S. equity funds — a big loser on the net transfer front — were the second-largest asset class recipient of new monies: 20% or some $180 billion. Large U.S. equity funds now comprise 22% of the index, while GIC/stable value funds represent 13% of the total.
Year-to-date, participant transfers have trended toward less volatile investments, with bonds, GIC/stable value, and money market funds attracting most of the reallocations. Target-date funds, which led the outflow asset classes in the first quarter of the year, have surrendered that position to large cap U.S. equity funds and company stock in recent weeks.
