Participants Actively Move to Equities in May

June 18, 2013 ( - After reaching a low during the month of April (0.024%), defined contribution plan participants’ daily transfer volumes increased significantly in May, according to the Aon Hewitt 401(k) Index.

There were nine separate days in May with transfer activity above normal, which is three times as many days that occurred in April. Equities were favored over fixed-income investment vehicles during May. The total net transfer activity reflects 55% in equities, up from 41% in April.  

Total net transfer activity was significant, totaling $486 million or 0.33% of total participant balances. This amount is more than twice April’s total of $200 million, and only January has had higher monthly activity (net $930 million) for the year.  

Net transfer activity into diversified equities (equity excluding company stock) asset classes totaled $316 million or 0.22% of total assets. However, when company stock is included, the transfers total nets $144 million (0.10%) in movement away from equities.

Total net outflows were mainly from two asset classes: bond funds, which decreased by $192 million (40%), and company stock funds, decreasing by $172 million (35%). In addition, small U.S. funds decreased by $45 million (9%), and emerging market funds decreased by $32 million (7%).  

Most of the transfer inflows were in premixed funds, which received $203 million (42%), which continues a similar trend in recent months. International funds had $127 million (26%) while mid-U.S. funds had $69 million (14%) of inflows. Specialty/sector funds also received nearly $45 million (9%).  

Employee discretionary contributions, another measure of participant sentiment, decreased to 64.0% in equities for May. This is down from 64.3% in April. By the end of May, participants’ overall equity allocation increased to 62.5%, from 61.9% at the end of April. This level establishes a new high as recorded by the Aon Hewitt 401(k) Index since before the financial crisis in 2008.  

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