Market Continues to Move Participants

February 22, 2010 ( – Once again, 401(k) participants that were inclined to rebalance their accounts tended to chase the market.

According to the Hewitt 401(k) Index, transfers were strongly equity-oriented during the first half of the month, with participants moving monies out of fixed income investments and into equities during 9 out of 10 days.  However, as the market retreated mid-month, 401(k) participants also changed the direction of their transfers, and moved monies back into fixed income investments during 8 out of 9 days in the second half of the month. A tendency to move after the market does is a tendency that those participants who are inclined to rebalance their accounts have demonstrated over time (seeParticipants Go With the “Flow” in 2009).   

The total transfer in January was equity-oriented, with $81 million shifting from fixed income investments to equities.  Stable value funds experienced the largest outflows, with $224 million moving out of this asset class, though company stock funds also had significant outflows ($113 million).

Most of those transfers moved to lifestyle funds, which received the largest inflows ($135 million), and bond funds ($103 million, followed by large U.S. equity ($35 million), international ($31 million) and small U.S. equity ($29 million).

On average, 0.04% of balances transferred on a net daily basis in January, slightly higher than the latter half of 2009, where transfers averaged 0.03% of balances.  In addition, 2 days of the month experienced what Hewitt characterized as “above normal levels1 of transfers; January 4 (when 0.09% of balances transferred, a little more than twice normal levels), and January 20 (when 0.07% of balances transferred).  Transfers favored equities on both of those above normal trading days.

Participants’ total equity allocation was down slightly to 57.8% at the end of January, from 58.1% at the end of December 2009, though Hewitt said that that was mainly due to negative returns in the stock market.  That said, employee equity contributions increased slightly from 59.6% at the end of 2009 to 60.4% in January 2010.

GIC/stable value represented nearly 27% of the total portfolio in the Hewitt 401(k) Index, with large US equity next-best represented with just over 17% – and company stock just behind with 14.37%.  After that, the other allocations ran:

  • 11.31% lifestyle/pre-mixed
  • 7.09% – international
  • 5.92% – bond
  • 5.39% – balanced
  • 4.80% – small US equity
  • 2.54% – self-directed/brokerage window


1 A “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and two times the average daily net activity of the preceding 12 months.