401(k) Participants Exit Fixed Income in March

May 2, 2012 (PLANSPONSOR.com) - Transfer activity in March was low, with just 0.024% of total defined contribution plan balances transferring plan assets daily, on average, according to the Aon Hewitt 401(k) Index.

The net direction of transfers during the month was toward equities, despite 55% of days favoring fixed income investments. Overall, $151 million transferred into diversified equities (equities excluding employer stock) from fixed income investments.   

The outflows from company stock did not offset the net transfer amount by much ($39 million), allowing the net transfer movement for the month to record a noteworthy $112 million away from fixed income. The total transfer amount was $219 million within the Index for March, about a third less than both January and February.  

GIC/stable value funds accounted for 44% ($95 million) of the outflows, followed by bond assets at 30% ($66 million). Company stock had 18% ($39 million) of outflows, and the small U.S. equity asset class accounted for the remaining 8% ($17 million).  

The largest inflow amounts went into lifestyle/pre-mixed funds and large U.S. equity funds, which received 41% ($90 million) and 40% ($88 million) of inflows, respectively. Participants also moved 6% ($12 million) of net inflows into self-directed brokerage window funds.

As domestic markets continued to rally, employee discretionary contribution rates moved almost a full percentage point toward stocks, with the overall allocation directed to equity funds now averaging 62.6% in March, up from 61.7% in February. The equity allocation rates rose almost 3% through the first quarter.  

The total asset allocation of equity asset classes continued to rise in March; equities now hold 60.6% of total assets, which is a 0.4% increase for the month.