Investing August 10, 2001

Participants Make Fixed Income Shift in July

August 10, 2001 (PLANSPONSOR.com) - Participant transfer activity was largely "normal" in July but moved increasingly toward more conservative investments, according to the Hewitt 401(k) Index.
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Net participant balance transfers moved from equity to fixed income on 15 of the 21 trading days in the month, which saw an average of just 0.05% of participant assets in the index move.   That’s about half the volume of a year earlier (0.09%).

Hot “Streak”

Trading volume was normal except on July 3, when it was low ahead of the Fourth of July holiday, and picked up to moderate on July 5, when the net activity was 0.13% of total balances and 1.99 on the index scale, indicating about double the normal level.   Ironically, trading on US markets was relatively subdued on that day.

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Participants inclined to move to equities chose a three-day streak in late July to do so, with net moves to stocks on July 23-25.   On the first two days of that streak, US stock markets were in a slump as a wave of bad earnings news dampened spirits.   However, the largest participant movement toward equities – roughly 1.5 times normal – came on July 25, when US stock indexes made a comeback.   That could mean participants bought in at a relative high for the period.

The index reflects an “average” level of transfer activity equal to a Hewitt Index reading of 1.0. Readings higher than 1.0 indicate heavier trading than usual, while readings less than 1.0 indicate lower-than-average trading activity.

Asset Allocation

In terms of asset allocation, company stock continued to have the largest chunk, 28.64% of the total assets in the index, followed closely by large US equity, a category which drew 24.32%.

Other categories:

  • 19.86% – GIC/Stable Value
  • 7.31% – Balanced
  • 3.82% – Lifestyle/Pre-Mixed
  • 3.24% – Midcap US equity
  • 3.08% – International
  • 3.11% – Money Market
  • 2.96% – Bond
  • 2.53% – Small US equity
  • 0.83% – Specialty Sector
  • 0.24% – Self-directed Window
  • 0.06% – Emerging Markets

Fund Flows

Large US equity continued to draw nearly a third of new contribution dollars, while nearly one dollar in five flowed into company stock investments.   GIC/stable value offerings drew 15.62% of the new funds, while 6.56% went to lifestyle funds and 4.21% to balanced and 3.94% to bond offerings.

The Hewitt 401(k) Index is based on data collected daily from 1.5 million 401(k) participants with approximately $68 billion in collective assets.

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