Hewitt: July Sees Light K Plan Transfers

August 9, 2004 (PLANSPONSOR.com)—A weak stock market sent some 401(k) participants looking for cover in July with fairly light transfer activity.

Transfer activity among 401(k) participants, although slightly heavier than June (See Hewitt: K Plan Transfers Inert in June ), was still far lighter than the historical average daily net transfer activity of 0.07%; in July participants transferred just 0.04% of their balances.

Transfer activity did increase slightly on July 23 and 26 when the Dow Jones Industrial Average dropped below the 10,000 mark, but still only matched the average level of 0.07% or 0.08% of participant balances.

Participants’ activity this month favored fixed-income, reflecting net transfers in that direction on 67% (14) of the trading days during the month, compared to only seven days in July on which transfers favored equities.

The benchmarks almost all posted negative returns in July.   The worst return was the NASDAQ (-7.83%), followed by the Russell 2000 (-6.73%), S&P 500 (-3.31%), MSCI EAFE (-3.25%), and Dow Jones (-2.69%).   The single positive return was posted by the Lehman Aggregate (0.99%).

Examining monthly transfer/cash flow data for the month on the whole, Hewitt found most inflows were directed into GIC/Stable Value (45.94%), followed by:

  • bond funds (29.64%)
  • company stock (12.26%) and 
  • money market funds (12.16%).

Leading the outflows were large US equity funds, which constituted nearly 39% of the outflows, followed by:

  • small US equity funds (-23.92%)
  • self-directed window (-8.89%)
  • lifestyle/pre-mix funds (-8.53%), and
  • midUS e quity (-6.44%).

At the end of July, equity investments represented about 64% of overall plan allocations, the lowest equity level since late last year, Hewitt said.

More information and Hewitt’s data can be found at http://was4.hewitt.com/hewitt/services/401k/observ/04_july.htm .