Despite relatively solid market performance overall in the wake of market turbulence late last year, 401k plan participants nonetheless chose fixed income over equity in March and the first quarter of 2019 overall.
Referring to “see-sawing stock price,” Illinois-based research and consulting firm Alight Solutions noted three trading days of above-normal trading activity during the month, following on similar movement in February.
Among the 21 trading days in March, 20 days saw the net trading activity moving from equities to fixed income funds.
On average, 0.014% of 401k balances were traded daily, with inflows going to bond, stable value, and money market funds.
Outflows were primarily from large U.S. equity funds, company stock, and small U.S. equity funds.
Reflecting market movements and trading activity, average asset allocation in equities remained unchanged at 67.9% in March.
Capital market performance
The capital markets delivered mixed performance during the month.
The U.S. bond market, as represented by the Bloomberg Barclays U.S. Aggregate Index gained 1.9%.
Large U.S. equities, represented by the S&P 500 Index, rose 1.9%. International equities, represented by the MSCIACWI ex-US Index, gained 0.6% and small U.S. equities, as represented by the Russell 2000 Index) fell -2.1%.
Alight defines 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 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.
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.
