401(k) Participants Still Fleeing Equities

By month end, nearly $219 million in balances transferred out of equities and into fixed income investments on a net basis, the Hewitt data showed. Approximately 80% of the net transfers flowed into GIC/stable value funds. Lifestyle funds received the second largest net inflow of $46 million.

U.S. equity funds took the biggest hit as a total of $80 million transferred out on a net basis during the month. However, the activity was much less significant than the $521 million net outflows experienced in January (See January Equity Market Upset Ignites 401(k) Equities Exit ). International funds, which attracted nearly $1.2 billion in 2007, also experienced net outflows of $74 million in February, following January outflows of $489 million. Company stock funds had $68 million transferring out in February.

Participants’ total equity allocation also declined slightly to 64.0% – the result of both market weakness and participant transfers. The equity allocation is now back to nearly the same level as in July 2004, Hewitt said. GIC/Stable Value held the largest portion of 401(k) assets among all asset classes at the end of February, followed by Large U.S. Equity (19.12%) and Company Stock (16.41%).

However, Large U.S. Equity was the winner of overall contributions to 401(k)s for the month (18.16%), followed by Company Stock (16.39%) and Lifestyle/Pre-mix funds (14.48%). Participant-only contributions also mostly were invested in Large U.S. Equity (21.03%). Lifestyle/Pre-mix funds gained 15.92% of participant-only contributions and GIC/Stable Value investments gained 15.04%.

Net transfers by 401(k) participants were fixed income oriented during 70% of the days in February, according to the Index. However, overall participant activity slowed down significantly compared to January. Only 0.04% of plan balances transferred on a daily basis in February, which was in line with the twelve month trailing average, and much lower than the 0.09% daily transfer experienced during January 2008. For the month, transfer activity was above normal on two days.

The Hewitt data is here .