February was a slow trading month for 401k investors, but participants nonetheless favored fixed income over equities when making allocation adjustments.
The Alight Solutions 401k Index finds that there were three trading days of above-normal trading activity, with 17 out of 19 days moving to bonds. On average, 0.016% of 401k balances were traded daily.
Inflows and outflows during the month also saw stable value and money market funds gain assets. Outflows were primarily from large U.S. equity funds, company stock, and international funds.
After reflecting market movements and trading activity, average asset allocation in equities increased to 67.9% at the end of February from 67.6% at the end of January. New contributions in equities remained unchanged at 67.7% in February.
Positive performance continued
For most investors, February continued the positive performance experienced in January of this year.
Large U.S. equities gained 3.2% and small U.S. equities increased 5.2%. International equities rose 2.0%. The U.S. bond market lost -0.1%.
According to Alight, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances (as a percent of total 401k balances) within the Alight Solutions 401k Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
A “high” day of relative transfer activity is when the net daily movement exceeds two times the average daily net activity.
A “moderate” day of relative transfer activity is when the net daily movement is between 1.5 and two 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.