Fixed Income Still Takes the Day in August

September 12, 2006 ( - 401(k) transfer activity may have given the slight edge to fixed income funds during August, but participants still looked kindly on equities - particularly of the international variety.

Hewitt Associates’ 401(k) Index showed transfer activity favoring fixed income on 13 of 23, or 57% of, trading days in August. However, International Equity funds and Lifestyle funds enjoyed a bountiful month with a $400 million inflow, Hewitt said in a news release.  

Things were also upbeat for equities judging by current 401(k) balances with 67.1% invested in stock funds – up from 66.8% in July. This reverses the trend of the equity exposure slowly decreasing from its April 2006 high of 68.7%. 

In July, market volatility drove participants to favor Fixed Income funds for the second month in a row (See Participants Continue Move to Fixed Income in July).

Another trend from previous months continued in August – asset losses by domestic equity offerings. According to the Hewitt data,   Domestic Equity funds saw more than $260 million transfer out during the month – following a $300-million giveback in July.Specifically, US Large Cap has lost more than $930 million year-to-date with Large Caps experiencing negative flows in 19 of the past 20 months. Further, in August, Small and Mid Caps also had significant outflows of nearly $220 million.

In terms of transfers recorded during the month, International funds led the way with a 44.5% inflow, while Lifestyle funds saw an asset gain of 30.1%. Small US Equities suffered the largest outflow at 42.3% during the month. Large US Equity offerings enjoyed the biggest chunk of overall new August contributions at 20.3% while GIC/Stable Value had 16.93% and, right on its heels, company stock had 16.92%.

The Hewitt data is available here .