International Equity Pulls In More 401(k) Money

February 7, 2006 ( - In January, over $400 million of 401(k) balances were shifted on a net basis to international and emerging market equity funds, according to Hewitt's 401(k) Index.

Net transfer activity was equity oriented on 70% of the days in January.   Small US equity funds pulled in more than $100 million, Hewitt data shows.

The trend of movement into international equity funds began in 2003, according to Hewitt, with $1.8 billion transferring into the funds since that time.   On the other hand, participants have been turning from large US stock funds for almost the same amount of time, and in January, more than $100 million transferred out of these funds on a net basis.

In addition, the percent of employee discretionary contributions that were directed to international equity funds was the highest since Hewitt began tracking the data in 2004.   Nearly 10% of employees’ discretionary contributions were directed to international and emerging market equity funds in January of 2006. That’s up from less than 6% in January, 2004. Again, in contrast, employees are directing less discretionary contributions to large US equities, with 24.2% directed to these funds in January 2006 versus 27.9% in January of 2004.

The Index shows a 7.2% overall weighting to international and emerging equity funds as of the end of the month.   The proportion of participants’ total balances in stock investments was 67.8%, up very modestly from the end of 2005.

Participants fled company stock funds as well as GIC/Stable Value funds in January which had outflows of 58% and 22%, respectively.

Relative transfer activity was high in the beginning of the month when the stock market was soaring, but slowed later in the month.   Hewitt reports four above normal days of transfer activity in January.