Safety – in Numbers: Participants Continue Fixed Income Move

August 15, 2008 ( - 401(k) participants moved assets out of equity into fixed income investments again in July, according to the results of the Hewitt 401(k) Index.

Net transfers were fixed income oriented on 91% of the days during the month.

Similar to the first half of 2008 (See 401(k) Participants Follow Move from Equity Trend in June ), GIC/Stable Value funds were the largest recipients of the net transfers in July. Inflows ($659 million) to this asset class represented 83% of the net transfers, Hewitt said.

Bond funds received 13% of the net inflows during the month, representing $101 million.

Over $692 million was shifted out of equities into fixed income asset classes, the Hewitt data showed. Approximately $228 million moved out of Large U.S. Equity funds, and $208 million moved out of International funds. In addition, $144 million was transferred out of Balanced funds during the month.

The combination of transfers and poor market conditions resulted in a decline in overall equity exposure. Only 61.7% of participants’ assets were allocated to equity investments by the end of July – returning to a level last seen in the middle of 2003, according to Hewitt. In terms of employee discretionary contributions, the equity allocation also slid by 1.3% to 64.0% at the end of July.

The top asset classes gaining participant deferrals during the month were Lifestyle/Pre-mix (20.89%), Large US Equity (19.27%), and GIC/Stable Value (18.66%).

The Hewitt data is here .