401(k) Investors Take Their Preference for Fixed Income to New Level

In October, all of their net trades went into fixed income, according to the Alight Solutions 401(k) Index.

Throughout 2020, 401(k) investors have shown a preference for fixed income over equities when it comes to making trades in their accounts, according to the Alight Solutions 401(k) Index. In October, they took that to a new level.

For the first time in the more than 20-year history of the index, an entire month, October, saw net trading flows move exclusively into fixed income. There were also seven days of above-normal trading activity, the most since March.

While all 22 trading days favored fixed income over equities, 401(k) investors moved a mere 0.54% of their money into it during the month.

Asset classes with the most trading inflows in October were stable value funds, which amassed 49% of inflows valued at $603 million, followed by bond funds (39%; $472 million) and money market funds (11%; $138 million).

Asset classes with the most trading outflows in October were large U.S. equity funds (44%; $534 million), target-date funds (TDFs) (18%; $215 million) and mid-U.S. equity funds (11%; $139 million).

Reflecting market movements and trading activity, the average asset allocation in equities decreased to 65.4% in October from 66.1% in September. New contributions to equities remained at 67.2%, the same as in September.

Asset classes with the largest percentage of total balance at the end of October were TDFs (29%; $64 billion), large U.S. equity funds (25%; $55.1 billion) and stable value funds (10%; $23 billion).

Asset classes with the most contributions in October were TDFs (48%; $546 million), large U.S. equity funds (20%; $227 million) and international equity funds (7%; $78 million).

Small U.S. equities rose 2.1% in the month, while large U.S. equities fell 2.7%. International equities were also down, by 2.2%, and U.S. bonds eked downward by 0.5%.