The ongoing flight (or rather slow-moving glide) from equities to fixed-income continued in 401ks in October.
It was another slow month for 401k trading overall, according to the Alight Solutions 401k Index, but the overwhelming majority of days saw net trading activity move from equities to fixed-income funds, with one day of above-normal trading.
On average, 0.015% of 401k balances were traded daily, and 21 of 23 days favored fixed-income funds.
Trading inflows mainly went to stable value, bond and money market funds, while outflows were primarily from company stock, large U.S. equity and small U.S. equity funds
October investment portfolios
After reflecting market movements and trading activity, average asset allocation in equities increased from 67.1% in September to 67.3% in October.
New contributions to equities decreased from 67.5% in September to 67.4% in October.
Market observations
October saw gains broadly for capital market indices with international equities (represented by the MSCI All Country World ex-U.S. Index) rising 3.5%, small U.S. equities (represented by the Russell 2000 Index) gaining 2.6%, large U.S. equities (represented by the S&P 500 Index) advancing 2.2% and U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) earning 0.3%.
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” relative transfer activity is when the net daily movement exceeds two times the average daily net activity.
A “moderate” 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.
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.
