Hewitt Index Shows January Activity Subdued

February 14, 2002 (PLANSPONSOR.com) - Transfer activity in 401(k) plans was muted in January 2002, though participants who did move their money generally did so in the direction of equities.

According to the Hewitt 401(k) Index, the average daily net activity in the nation’s 401(k) plans was 0.05% in a month where:

  • the S&P 500 lost -1.46%
  • the Russell 2000 dipped -1.04
  • the Lehman Aggregate Index inched up by 0.81%
  • the MSCI EAFE lost -5.31%.

Not only was the 0.05% result the lowest figure of any January data since the Index first began to measure activity in 1998, but there were also no days in the month where transfer activity was higher than normal.

A normal level of relative transfer activity is when the net daily movement of participants’ balances within the index is between 0.3 times and 1.5 times the average daily net activity of the previous 12 months.

On 12 of the month’s 21 trading days – including January 29, when the S&P 500 posted its weakest performance in January, participants transferred funds towards equities at the expense of money market funds and their company stock holdings – perhaps due to the Enron scare.

Of funds transferred, about 72% came out of these two asset classes on a net basis in January. In contrast, transfers generally flowed into small US equity, international, and bond investment options during the month, Hewitt reports.

Overall, participants’ allocation to equities edged up in January, with 68% of participant balances in equity asset classes as of January 31, compared to 67.4% at the end of December.