March Transfers Rise According to Hewitt Index

Most 401(k) mutual fund trading occurs at the price set at the close of the trading day, regardless of when the transfer was initiated.

For the most part, participants moved funds away from stocks and toward fixed income investments on 73% of the the month’s trading days – the second highest tilt toward the asset class since August 1998 in the midst of the Russian default crisis.

Fed Watching

Once again, participants kept an eye on the Federal Reserve, as the highest level of transfer activity occurred on March 22, the day after interest rates were cut by a half percentage point. 

Trading activity that day was nearly three times the daily average, and headed toward fixed income following a steep fall in US stock markets, which were disappointed with the size of that cut.

Despite those trends, the overall trading volume remained relatively muted, with only about 0.08% of the total $80 billion in participant balances tracked by the Index moving on any given day.
 
The index of some 1.5 million 401(k) participants found that average daily net transfer activity was 0.09% higher during March, with six “above normal” trading days during the month.  Both matched peaks not seen since July 2000.

Participant trading also peaked on March 1, 14, 20 and 30 on a relative basis, all with a net movement toward fixed income investments.

March 1 and March 30 were particularly busy.  Once again, both days began with steep drop-offs in the equity markets, with recoveries late in the session that may have spared investor losses as they moved from stock funds.