Participants Unmoved By September Markets

October 8, 2001 ( - In one of the most volatile and unsettling months in history, participants stirred, but only just barely.

With US markets closed for a week in the wake of the September 11 terrorist attacks, participant transfer requests queued up, and nearly $400 million shifted from stocks to stable value investments when the markets reopened on September 17, according to the Hewitt 401(k) Index.

Still, while that was a record for the index and nine times the normal transfer level, it was still just 0.58% of the $71 billion tracked by the index (see Attacks Send Participants in Search of Stability ).

Trading remained relatively high for the rest of that week (see Relatively Speaking, Transfer Activity Remains High ), but on an absolute basis, just over 1% of participant balances moved, and participant call activity remained muted at most providers.

September Shifts

There were three high volume trading days during the month, all in that first week after the markets opened (see Transfers Trend Higher, Toward Fixed Income ). In that first week, weekly net transfer activity was 1.15% of balances, compared to normal weekly net transfer activity of 0.33%

However, by the end of the second full week of trading following the attacks, participants were back within normal levels, and heading back toward stocks.

Nonetheless, by the end of September, the combination of a tumbling stock market and participant shifts had taken the overall equity allocation of the index to 66.8% at the end of September, the lowest level since the inception of the index.

Cross Purposes

In fact, participant transfers favored fixed income investments every trading day from August 24 until September 24, and 56% of transferring monies flowed to GIC/stable value investments during September. Transfers favored equity investments on just three of the 15 trading days during the month- all in the last week of the month.

Despite the transfer trends, new contributions continued to favor company stock (27.93%) and large US equities (26.84%), while GIC/Stable value funds drew just 12.52% of September’s contributions.

All in all, the vast majority of the 1.5 million participants tracked by the Hewitt index continued to leave their balances untouched, and their contribution directions- leaving many to ride the same market wave down that they rode higher two years earlier.