Employer Stock Hot Transfer Ticket in April

May 13, 2002 (PLANSPONSOR.com) - In a month where equity markets were hammered, daily net participant transfer activity also pulled back, according to the Hewitt 401(k) Index.

Transaction volumes were normal on all but two trading days – and just moderate on those two days (April 10 and April 30).  Overall average monthly net activity was 0.06% of participant balances, compared with the normal average of 0.07%.

Stock ‘Bloc’

However, company stock was more than half the amount transferred on 14 of the 20 trading days during the month – both positive and negative.

Hewitt notes that this year, company stock funds saw positive flows in terms of transfers on 52% of days – an unusually high number.  By way of contrast, Hewitt cites 1998 when, during another period of weak markets, money transferred into company stock on a net basis on just 42% of the trading days.

It is also notable that net transfer activity specifically into or out of company stock was higher than average in April–in contrast to the trend in aggregate net transfer activity for the month. Overall average daily net transfer activity into and out of company stock is 0.07%, according to Hewitt, while in April, average daily net transfer activity into and out of company stock was 0.12%.

Holding Patterns

Despite those trends, company stock remained the largest component of the balances in the Hewitt index, comprising just over 29% of the total assets (although all of that money is not under participant direction).  Large US equities held onto its second place position, garnering nearly 23% of the balances, while GIC/Stable Value offerings make up roughly 21% of the total.  All three enjoyed slightly higher proportions than a month ago (see Participant Transfers Roar Back to Life in March ).  Overall, all of the major fund sectors held their own during April.

As for new monies, large US equities drew in roughly 28.5% of the month’s new contributions, followed by GIC/Stable Value (17.2%) and company stock (15.72%).  Lifestyle/premixed offerings attracted 9.65%, while balanced offerings drew nearly 8%, and bond funds pulled in 5.13%.  Perhaps in response to their strong performance during the month, small US equity funds represented nearly 6% of the total.

*A ‘normal’ level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.