401(k) Transfers Below Average in January

February 8, 2005 (PLANSPONSOR.com) - 401(k) participants didn't shift much in the way of assets in January, but the assets that did mostly made the conservative move from stocks to bonds.

According to the Hewitt 401(k) Index, average daily activity was 0.04% of assets, well below the average of 0.065% that has been seen since the inception of the Hewitt 401(k) Index, according to a  news release from the company. 

This was the same transfer percentage as was seen in December, but was also well below the 0.7% seen last January (See December 401(k) Transfers Stagnant ). Despite an early flourish in activity that was most likely the result of a rising stock market in the fourth quarter of last year, transfer activity was below average on a daily basis for most of the month. Overall, there were two days with above average transfers.

This low movement is indicative of the past year, in which transfer activity has mostly been below average as investors remain skittish about the state of the economy.

Of the little amount of money that did move, most of it went to fixed-income investments from stocks. Eighty percent of the days in January saw such a shift overall, according to the news release.

On the month, $175 million in balances transferred out of diversified stock funds on a net basis. Small US equity funds were hit the hardest, with $110 million transferring out on a net basis on the month. Most of this money went to GIC/stable value funds, according to Hewitt. Large US equity funds experienced smaller net outflows of $100 million. International and emerging markets, riding on the back of a weak US dollar, experienced net inflows in January.

Regarding allocation of participants’ discretionary contributions, 65% were allocated to stock investments in January. The overall proportion of participants’ plan balances in stocks is now at 66.3%. This is well above the low of 57% seen in 2003, but well below the 74% seen in 2000.