Participants End Love Affair with International Funds

June 8, 2006 ( - The love of international and emerging market equity funds from 401(k) participants halted in the second half of May, according to data from Hewitt's latest 401(k) Index.

International and emerging market equity fund inflows continued in the first part of May, but as market conditions both domestically and abroad declined, 401(k) participants reversed course. Between May 15 and May 31, 5.8% of emerging market balances flowed out of such funds on a net basis in the form of transfers, while 1.2% of international equity fund balances did so over that same time period, Hewitt data shows.

Because of strong inflows early in the month, international equity funds still had positive net transfers for May (34.4%). However, 3.2% of emerging market equity fund balances transferred out on a net basis for the month, which was nearly 12% of the Index’s total net transfers out.

Participants also pulled out of mid US equity funds (11.5% net outflows), small US equity funds (21.7% net outflows), and even lifestyle/premixed funds (8.4% net outflows). Large US equity funds showed 37.7% of total net outflows in May.

Starting May 17, net transfer activity was fixed income oriented on every day. For the month, Money Market funds showed a net inflow of 20.8%, while GIC/Stable Value funds had a net inflow of 38.8%.

However, Large US Equity funds pulled in most of participant contributions in May (23.2%), while GIC/Stable Value funds pulled in 17.1%.

Asset allocation was little changed in May, with Company Stock funds holding 22.1% of participant balances, GIC/Stable Value 21.4%, and Large US Equity 20.8%.

The Hewitt data can be viewed here .