Caution Still Prevails for 401(k) Participants

October 16, 2012 ( - The Aon Hewitt 401(k) Index pointed to continued participant uncertainty in September as daily transfer volumes remained significantly low compared with historical levels.

By Rebecca Moore | October 16, 2012
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Investors were encouraged by 30 consecutive months of job growth, modest growth in gross domestic product (GDP), the Federal Reserve announcement of QE3 and positive corporate earnings reported. However, with uncertainty around the European debt crisis, high unemployment and the fact that fewer companies beat revenue expectations this year (lowest level since 2009), most participants elected to maintain their current holdings. On average, only 0.023% of balances transferred on a net daily basis, which is similar to the volume of transfers over the past three months.  

Among defined contribution plan participants who transferred monies, most transferred from equities into fixed-income investments in September—a trend that also describes the entire third quarter. Nearly three-quarters (74%) of the days in September favored transfer activities into fixed-income funds, representing $237 million in total flows or 0.2% of total assets. However, when company stock activity is excluded, equity outflows account for just $46 million (0.03%) of participant balances.  

For September outflows, company stock funds lost $191 million (67%), small U.S. equity funds lost $27 million (10%) and large U.S. equity funds lost $27 million (10%). Similarly, the majority of movement during the third quarter was out of company stock funds. For the quarter, $750 million transferred out of equities, however, company stock accounts for well over half ($472 million) of this activity. The next largest outflows were from the small U.S. asset classes, which lost $154 million (18%) for the quarter.