Attacks Send Participants in Search of Stability

September 19, 2001 ( - Plan participants reentered the market with a vengeance on Monday, transferring some $400 million in plan assets, on a net basis, to fixed income investments, according to the Hewitt 401(k) Index.

Once again, participants likely “locked” in trading losses, since most such transfers are accomplished at the closing market value ? a day where major US stock indexes dropped anywhere from 5% to 7% – and some employer securities fared even worse.

Stock Shelved

On Monday, Hewitt noted that money primarily flowed out of large U.S. equity and into GIC/Stable Value – the most conservative asset class generally available to 401(k) participants. Net transfers coupled with the market declines left the overall equity exposure of the Hewitt 401(k) Index at 61.5% from 68.5% at the end of August, which represented the lowest level of equity exposure in the index since its inception (see August Hewitt Index Sees Below Average Transfers ).

Overall participant call volume among 401(k) plans administered by Hewitt was only slightly higher than normal on Monday, suggesting that participant activity was not widespread but might be limited to a small number of participants making larger-than-normal transfers.

Record Volume

While trading had been suspended in US markets for nearly a week, Monday’s activity was more than nine times the “normal” level of trading and more than twice the amount registered on other high activity days, including the August 1998 Russian debt crisis.

It was the highest level of investment transfer activity ever recorded by the Hewitt 401(k) Index since its inception in August 1997.

The Index, which tracks the daily transfer activity of nearly 1.5 million U.S. employees with $71 billion in assets, saw daily net transfer activity reach 0.58% of total balances. That stands in sharp contrast to the average daily net transfer, which has averaged just 0.06% over the past year.