TDFs Top Outflow List in November

In a month of mixed returns, participants who took the time to initiate a transfer seemed to be moving away from defaults.

Once again target-date funds (TDFs) took the brunt of the outflows: 59% ($118 million), followed by the $27 million (14%) that fled small U.S. equity funds. Company stock, long an employer contribution default for some plans, was 9% of the total November outflows, according to the Aon Hewitt 401(k) Index.

Target-date funds have led the outflow list for several months now, including October, September, August, and June.

That said, November was another slow trading month in defined contribution plans with no days of above-normal trading activity — that hadn’t happened since the dog days of summer (July 2015). Participants favored fixed income over equities when they made trades. In November, 60% of the trading days showed more inflows to fixed income.

Still, their prominence as default contribution investments (and/or qualified default investment alternatives (QDIAs), mean that those TDF outflows were quickly replenished: target-date funds captured 41% of the employee contribution inflows during the month, some $328 million.

After combining contributions, trades, and market activity, the overall equity allocation in participants’ accounts rose to 65.6% at month-end, up slightly from 65.5% at the end of October. Future contributions to equities increased to 66.4%, from 66.0% in October.

Transfer inflows during the month favored:

  • Large U.S. equity funds (56%);
  • International (15%); and
  • GIC/stable value funds (13%).

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