While participant transfer activity level was within normal levels in May (about 0.07% of total balances), overall transfer activity was very different from the trends evidenced thus far in 2001. In contrast to the prior four months, May movements were decidedly out of more conservative mixes such as lifestyle and bond funds (24.3% and 32.2%, respectively), and in favor of large and small US equity options, which drew 31.8% and 24.6%, respectively.
However, May echoed certain April trends- including moves from company stock, which represented more than 40% of April’s outflows and more than 42% of those in May.
And while lifestyle/pre-mixed attracted 30.52% of the transfers in April, those funds represented 24.3% of the outflows in May.
Business As Usual
There were only three “above-normal” trading days during the month, and only two – May 3 and May 16- represented high trading days. On May 3, trading activity was about 2.25 times the normal levels, with money flowing on a net basis to fixed income alternatives, as major US stock indexes slumped.
And on May 16, the market’s exuberant reaction to the Fed’s May 15 interest rate cut carried over to participant accounts as well. On that day participant trading activity was nearly three times the normal level ? and headed toward equities ? on a day when most equity mutual fund NAVs would have been at a relative high point.
*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 Index is 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.
Out of Balance
At the end of May, the percent of Hewitt 401(k) Index balances invested in equities was 70.6%, up slightly from April’s , but still lower than the 74% of balances in equities as of January 2001. Company stock was still top of the chart, however, with 29.09% of the total participant asset allocation in the Hewitt Index at May 31. Self-directed windows continued to represent a minuscule (0.23%) part of the total allocation mix. Other categories included:
- 24.82% – Large US equity
- 19.14% – GIC/Stable Value
- 7.26% – Balanced
- 3.83% – lifestyle/premixed
- 3.31% – Mid US equity
- 3.21% – International
- 3.15% – Money Market
- 2.71% – Bond
- 2.38% – Small US equity
- 0.81%- Specialty sector
- 0.23% – Self-Directed Window
- 0.07% – Emerging markets