401(k) Participants Trade Less as Markets Stabilize

With markets less volatile than in October, 401(k) participants slowed transfer activity in November.

Participants in defined contribution plans were light traders in November, with only two days of above-normal transfer activity, according to the Aon Hewitt 401(k) Index.

This is a sharp contrast to October, which had seven above-normal days of trading, most of which were early in the month, following a sharp but short-lived increase in volatility in U.S. and global markets. However, November transfer activity was in line with the rest of 2014. Overall, November saw 0.023% of total assets traded, with slightly more (53%) trading days favoring fixed-income assets over equities. Transfers away from diversified equities (equity assets excluding company stock) totaled $136 million.

On Wall Street, November was a positive month for the major asset classes. U.S. large-cap equities, as measured by the S&P 500 Index, gained 2.7% during the month. Small-cap equities underperformed their large-cap counterparts but still posted a positive return of 0.1%, as measured by the Russell 2000 Index. The Barclays U.S. Aggregate Index, a measure of the fixed income market, returned 0.7% during November. Non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, rebounded from a poor showing in October and returned 0.7% during the month.

In 401(k) plans, the asset classes with the most inflows included large U.S. equity funds with $150 million (42% of all asset trades), bond funds with $63 million (18%) and money market funds receiving $39 million (11%).

Company stock funds led the net outflow activity with $228 million (64%), followed by small U.S. equity with $59 million (17%) and GIC/Stable with $35 million (10%).

After incorporating trading and market activity, participants’ overall allocation to equities increased slightly to 66.0% from 65.7% in November. Future contributions to equities decreased marginally to 66.3% from 66.4%.

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