401(k) Participants Continue Move to International Funds

March 9, 2006 (PLANSPONSOR.com) - Participants in 401(k) plans continue to transfer their monies into international and emerging market equity funds in February, though at a slower pace than January's record transactions.

The inflow to international and emerging markets equity funds was nearly $150 million in February, according to data from Hewitt Associates.   This compares to the more than $425 million record amount transferred into such funds in January (See  International Equity Pulls In More 401(k) Money).

In addition, elections for future contribution investments also were increasingly focused on international and emerging market funds.   The percent of employee discretionary contributions directed to these funds was 10.7% in February, up from 9.6% in January, Hewitt’s data showed.   In spite of the transfers and new money, international and emerging market equity funds account for only about 7% of total 401(k) balances.

The highest inflow of 401(k) transfers, however, was realized in February by small US equity funds.   Net transfers into those funds reached $175 million for the month.

Meanwhile, participants abandoned large US equity funds and company stock funds, moving around 28% and 49% of assets from these funds, respectively.   The proportion of total 401(k) balances in stock investments inched up to 68.1% from 67.8% in January.

On average the data showed slightly below average net transfer activity for the month.   Hewitt reported three days of above normal activity.