Despite Market Rebound, Investors Flocked to Fixed Income in Q119

Nearly 90% of the days in the quarter saw net trading activity favor fixed income, according to the Alight Solutions 401(k) Index.

Even as stock markets rebounded in the first quarter, 401(k) investors moved from equities to fixed-income funds, according to the Alight Solutions 401(k) Index. Investors favored fixed income on nearly 90% of the trading days, 54 out of 61, in the quarter.

In total, there were nine days of above-normal trading activity, three in each month. During the first quarter, investors transferred an average of 0.50% of their balance.

Asset classes with the most trading inflows in the first quarter were bond funds (66%, with $627 million flowing into them), stable value funds (24%, $225 million) and money market funds (6%, $58 million). Asset classes with the most trading outflows in the quarter were large U.S. equity funds (51%, $408 million), company stock (30%, $280 million) and international funds (9%, $88 million).

After steep declines in the fourth quarter of 2018, the start of 2019 was strong for small U.S. equities, which rose 14.6% in the first quarter; large U.S. equities, up 13.7%; international equities, up 10.3%; and U.S. bonds, which rose by 2.9%.

For the month of March, 401(k) investors continued their march into fixed income, with that asset class garnering the majority of the transfers on 95% of the trading days. Year-to-date, fixed income has garnered flows on 89% of the trading days. Investors favored equities on only one day in March. Year-to-date, they have primarily moved into equities on only 11% of the trading days.

In March, an average of a mere 0.014% of 401(k) balances were traded daily. The asset classes with the most trading inflows in the month were bond funds (61%, $226 million), stable value funds (26%, $96 million) and money market funds (6%, $24 million). Asset classes with the most trading outflows in March were large U.S. equity funds (37%, $137 million), company stock (22%, $82 million) and small U.S. equity funds (15%, $54 million).

Asset classes with the largest percentage of total balances at the end of March were target-date funds (TDFs) (29%, for a total of $55.93 billion of assets), large U.S. equity funds (21%, $48.16 billion) and stable value funds (10%, $19.43 billion).

Asset classes with the most contributions in March were TDFs (42%, $835 million), large U.S. equity funds (21%, $416 million) and international funds (8%, $159 million).

The capital markets delivered somewhat poor performance in March. The U.S. bond market was up 1.9%. Large U.S. equities rose 1.9%, and international equities ticked upward by 0.6%. Small U.S. equities fell by 2.11%.

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