October was another light trading month for 401k plan investors, according to the latest iteration of the Alight 401(k) Index.
With just two above-normal trading days, the index revealed stable value funds accounted for over 80% of net inflows, while outflows were primarily from target date funds (37%), company stock (35%) and large U.S. equity funds (12%). For comparison, there were five above-normal trading days in the third quarter of 2022, down from 17 above-normal days in Q2.
On average, 0.012% of 401k balances were traded daily, and 18 of 21 days favored fixed income funds, essentially mirroring September index findings, when 19 of 21 days favored fixed income funds. Trading inflows mainly went to stable value, money market and bond funds. Outflows were primarily from target date, company stock and large U.S. equity funds.
After reflecting market movements and trading activity, average asset allocation in equities increased from 67.2% in September to 68.1% in October. New contributions to equities increased from 68.0% in September to 68.1% in October.
The asset classes with the largest percentage of total balance at the end of October were target date funds at 29%, large U.S. equity funds (26%) and stable value funds (10%). Target date funds accounted for 50% of contributions in October, followed by large U.S. equity funds (20%) and international equity funds (7%).
Alight tracks the 401k trading activity of over 2 million people with more than $200 billion in collective assets. These reports detail monthly and quarterly 401k trading volume, asset flows and market activity.
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 401(k) 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 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 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.
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