Transfers Slow, But Participants Still Fled TDFs in October

The markets rebounded in October, but participants moved money like it was still September.

As was the case in September, participant transfers fled target-date funds (30%), company stock (27%) and large U.S. equity funds (21%), according to the Aon Hewitt 401(k) Index.

And once again, the asset classes benefiting from those outflows were GIC/stable value funds (36%), bond funds (34%) and money market funds (16%).

On the other hand, October turned out to be a slow month for trades in defined contribution plans, as participants transferred an average of 0.018% of total balances per day — the lowest monthly trading level in three years. On average, participants transferred 0.026% of total balances in September, the same as in August and slightly higher than the averages for July (0.021%) and June (0.024%).

When participants made trades in October, they favored fixed income over equities, with 77% of the trading days showing more inflows to fixed income. There were two days of above-normal trading activity for the month, compared with four in September. Year-to-date, there have been 34 above-normal volume days. (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.)

However, when it came to new money flows, TDFs captured 41% of the flows ($391 million) and large U.S. equity funds captured 19%, or $180 million. Not surprisingly, TDFs and large U.S. equity funds represented nearly half of the dollar value of the Aon Hewitt 401(k) Index, at 23% each, with GIC/stable value funds now constituting 13%.

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