Equity markets posted their worst month in over two years, yet 401k investors didn’t make reactionary trades, according to the Alight Solutions 401(k) Index. There were no above-normal days in April. However, net transfers in April were up slightly compared to March (.10% vs .09%) as investors moved money out of equities and into fixed income.
“Outflows were primarily from target date, small U.S. equity, and company stock funds.”
On average, 0.011% of 401k balances were traded daily and 15 of 20 days favored fixed-income funds.
Trading inflows mainly went to stable value, specialty/sector, and money market funds. Outflows were primarily from target date, small U.S. equity, and company stock funds.
After reflecting on market movements and trading activity, average asset allocation in equities decreased from 69.9% in March to 69.1% in April. New contributions to equities decreased from 69.7% in March to 69.5% in April.
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.
This followed a busy March for 401k investors, with five above-normal trading days in the month, often occurring when the market fell. Despite the market rally for that month, investors continued to move money from equities to fixed income.
On average, 0.014% of 401k balances were traded daily in March, and 15 of 23 days favored fixed-income funds. Trading inflows overwhelmingly went to stable value funds, and outflows were primarily from target date, company stock, and mid-U.S. equity funds.
A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity.
A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.
Target date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
