Not only did activity pick up significantly from the prior month, equity investments regained their luster in what Hewitt described as the ‘most bullish transfer month since January 2000.’ Transfers favored equities on a net basis on 65% of the trading days in March (13 out of 20), compared with 70% in January 2000. A month ago transfers favored fixed income investments on 14 of 19 trading days (see Participants Still Seeing Shadows in February ).
Average daily net transfers were 0.08% of total balances, slightly above the typical 0.07% pace for the Index, which tracks some $1.5 billion in plan assets. Hewitt notes that daily net transfer activity has trended to a below average 0.06% of total balances since the terrorist attacks last September.
There were five above-normal net transfer activity days. Particularly notable were March 7 and 15, where activity was roughly three times the normal level – and March 28, the last trading day of the quarter, where activity was 3.87 times normal. Somewhat ironically in view of the rest of the month’s activity, on those three days net trading activity favored fixed income investments. In fact, on March 28, 85% of the net transfer flow came from company stock – and 88% went toward GIC/Stable Value.
Company stock continued to suffer a loss of investment – almost half (47.60%) of the fund outflows during the month came from that sector – though that was down from the 60%+ that fled the investment last month. Specialty/sector funds made up another 28% of the outflow, and bond funds were close behind with nearly 22%.
Those funds largely flowed to large US equity funds (28.13%). In fact, according to Hewitt, March was the first month since November when that sector of the index saw a net inflow. GIC/Stable Value attracted nearly 24% and small US equity drew more than 21%. International funds, which had made up 11% of February’s outflow, drew nearly 10% of the inflowing funds in March.
At month end, however, company stock still comprised more than 28% of the total balances in the index – roughly the same as a month earlier (some part of that is not under participant direction). Large US equity retained its second-place weighting, with roughly 24%, both likely boosted as much by a recovering stock market as by contribution flows. GIC/Stable Value actually slipped a bit, comprising just 20% of the overall asset allocation in the index at month end.
Other categories were:
- 7.77% – balanced
- 4.00% – lifestyle/pre-mix
- 3.44% – bond
- 3.03% – small US equity
- 2.93% – money market
- 2.83% – international
- 2.40% – mid US equity
- 0.54% – specialty/sector
- 0.24% – self-directed
- 0.11% – emerging markets