Investing March 18, 2002

Participants Still Seeing Shadows in February

March 18, 2002 (PLANSPONSOR.com) - Participant transfer activity picked up a bit in February - but only slightly, and with a conservative bent - according to the Hewitt 401(k) Index.
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Overall, the average daily net trading activity comprised just 0.05% of the balances of the 1.5 million participants covered by the index.  In fact, trading was high on only three days during the month – February 14, February 21 and February 26 – all of which saw trading activity more than twice the normal levels – and all of which saw net trading activity favoring fixed income investments.

Painful Product

Of course, trading favored fixed income alternatives on a net basis on 14 of the 19 trading days during February – a short, but painful month for US stock indexes.  During the month the Dow gained 1.88%, but:

  • the S&P 500 slipped 2.08%
  • the broad-based Wilshire 5000 ended 2.19% lower
  • the small-cap oriented Russell 2000 was down 2.84% and
  • the tech-laden NASDAQ closed 10.47% lower than January’s close.

Fixed Fascination

Funds flowed from company stock to a variety of fixed income alternatives in the Hewitt index during the month.  In fact, more than 60% of the outflows in the index during February came from company stock, with large US equities (13.67%), international (11.88%) and lifestyle funds (10.29%) making up most of the rest.

On the receiving end, GIC/Stable value pulled in more than 37%, while money market options drew more than 30%, and bond funds captured 28.60%.

Those fixed income inclinations, combined with stock market weakness, trimmed the overall participant allocation to stocks from 68% at the end of January to 67.1% of the total at February’s close.

Stock Block

Still, at month-end, company stock continued to dominate the asset mix for plans covered by the index, nearly 28% of the total.  Large US equity was second-most prevalent, comprising 23.45% of the total assets, while GIC/stable value represented 21.14% of the total.  Other holdings included:

  • 7.81% – balanced
  • 4.00% – lifestyle/premixed
  • 3.81% – bond
  • 3.09% – money market
  • 2.70% – small US equity
  • 2.67% – international
  • 2.28% – mid US equity
  • 0.78% – specialty/sector
  • 0.23% – self-directed window
  • 0.09% – emerging markets

Shifting Signs?

A potential sign of shifting sentiments was the near 24% of new contributions that went to balanced funds – for a change, outnumbering company stock.  However, company stock still garnered more than 22% of the total, while large US equity was just behind with 21.07%.  GIC/stable value was the next most prevalent, attracting 11.47% of the new contributions.


Last month’s results – Hewitt Index Shows January Activity Subdued

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