401(k) Participants Favor Equities Despite Market Volatility in July

August 15, 2007 (PLANSPONSOR.com) - Despite market volatility in July, 401(k) participants moved their assets from fixed income investments to equities on 62% of the days in the month, according to Hewitt's 401(k) Index.

The majority of transfers to equity were to the international and emerging markets sectors. A total of approximately $200 million was moved toward international funds during the month, while emerging market funds received $58 million of net transfers in July, the Hewitt data showed.

Though net flows to equity were positive, market weakness reduced the overall allocation to equity investments to 68.2% by the end of July from 68.9% at the end of June.

Lifestyle funds also received positive net transfers of nearly $40 million for the month. However, company stock, GIC/stable value and small U.S. equity funds all experienced large outflows in July.

Participants transferred $169 million out of company stock funds during the month. GIC/stable value experienced net outflows of $58 million and $55 million was transferred out of small U.S. equity funds.

Large U.S. Equity funds received the largest share of overall contributions for the month (20.71%), followed by Lifestyle funds (17.42%) and GIC/Stable Value funds (14.81%). The same three investment categories received the bulk of participant-only contributions as well, at 22.08%, 18.84%, and 15.26%, respectively.

Large U.S. Equity funds also held the largest share of 401(k) assets as of the end of July (20.76%), though not much ahead of GIC/Stable Value funds (20.02%). Company stock funds held 18.14% of 401(k) assets by month end, while International funds held 9.26%, and Lifestyle funds held 8.5%.

The Hewitt 401(k) Index Observations report is here .