2015 Lightest Trading Year on Record for DC Plans

Aon Hewitt attributes this, in part, to the prevalence of target-date funds in DC plans.

According to the Aon Hewitt 401(k) Index, 2015 was the lightest trading year on record for participants in defined contribution (DC) plans.

Overall, 1.52% of balances were transferred in 2015—well below the historical average of 2.88%. There were 39 days of above-normal daily transfer activity in 2015. The number of above-normal days in 2015 (39) is in line with the average number of above-normal days over the past five years (35) and past 10 years (35), Aon Hewitt says.

Part of the light trading activity can be explained by the prevalence of target-date funds (TDFs), which are now the largest asset class in the 401(k) Index. As of year-end 2015, target-date funds represented 23.1% of total assets, slightly edging out Large U.S. Equity (22.7%).

When participants made trades, they tended to favor fixed income funds over equity instruments. The number of fixed income-oriented days was 139, compared to 109 for equity-oriented days. GIC/stable value funds received the most inflows (41%) while the majority of outflows came from TDFs (37%) and company stock (30%).

However, TDFs received the most contributions in 2015 (42% or $498 million).

After reflecting contributions, trades, fund changes, and market activity, participants ended the year with 65.4% in equities—a decrease from 66.4% of assets invested in equities at the end of 2014.

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