Participants "Bond" With Bonds in February

March 6, 2001 ( - Participants made a slow, but steady push toward less volatile investments in February, shifting money from equities to bonds, stable value and money market funds.

Overall transfer activity was relatively quiet during the month, according to the Hewitt 401(k) index, with just one above-normal trading volume day – February 28.  On that day participants shifted to bonds, as did the US markets as hope for an early Fed rate cut faded.   

However, participants shifted from equity to fixed income on 15 of the 19 trading days, the highest percentage of fixed income days since the launch of the index since August 1998, according to Hewitt.

Shelter Me

In fact, participants that did transfer were clearly looking for some shelter from the volatile stock markets.  Nearly 32% of the fund outflows covered by the index came from company stock, and nearly half (47%) were from large US equity stocks.  Most of that went to GIC/Stable Value funds, which attracted 37% and bond funds, which drew 37%.  Money market funds attracted nearly 17% of the total inflows.

A year ago, average net daily transfers were twice the current pace, and largely tilted toward stocks.

As of the end of February, the percent of Hewitt 401(k) Index balances invested in equities was 71%, down from 74% in January.  Still, company stock continued to dominate the asset allocation mix, representing nearly 29% of the total, roughly equal to January’s total.  Large US equity was a close second, with 25%, down from 27% a month ago.  Other categories included:

  • 18.90% – GIC/Stable Value
  • 7.92% – Balanced
  • 3.78% – Lifestyle/Premix
  • 3.33% – International
  • 3.51% – Mid-cap US equity
  • 3.02% – Money Market
  • 2.66% – Bond
  • 2.31% – Small US Equity
  • 0.66% – Specialty/sector
  • 0.07% – Emerging Markets

Self-directed windows constituted just 0.31% of the total, roughly equal to 0.32% in January.

February was the third-worst performing month ever for the NASDAQ, which lost 22.39% for the month. For the month, the S&P 500 lost 9.23%, its worst month since August 1998, while the Dow fell 3.6%, the Russell 2000 fell 6.68% and the Wilshire 5000 slid 9.55%.