September 401(k) Transfers Still Tilted Towards Fixed Income

October 12, 2010 ( – The latest data from the Aon Hewitt 401(k) Index for September indicates asset movement was slightly fixed-income-oriented even in light of equity market strength during the month.

An Aon Hewitt news release said that $54 million (0.05% of total assets) moved out of diversified equities into fixed income, excluding company stock transfers.

However, when viewed with company stock, transfers were strongly fixed-income-oriented. The news release said a total of $408 million moved out of equities, with the $354 million being pulled out of company stock representing nearly three-quarters of flows for the month.

On the other hand, GIC/stable value funds received the majority of the transfers, with $294 million shifting into this asset class.

Aon Hewitt said that in spite of an overall positive market during the third quarter, $560 million moved out of diversified equities and into fixed-income investments. Including company stock, over $1.2 billion shifted out of equity funds.

In fact, the biggest loser of the quarter was company stock, with a total of $643 million transferring out of these funds (representing 4.4% of assets in this asset class), followed by large U.S. equity funds (outflows of $439 million) and small U.S. equity funds (outflows of $175 million).

GIC/stable value and bond are the asset classes with the largest inflows for the quarter. GIC/stable value funds received $587 million. Bond funds had inflows of $552 million during the third quarter, Aon Hewitt said.

Transfer Volume Dips 

As for the volume of transfers, September was slightly lower than the 12-month trailing average with only 0.03% of balances transferred on a net daily basis during the month, and just two days in the month had an above-normal level of transfer activity. In total, six days of the quarter had transfer activity higher than normal, which was significantly lower than the second quarter (16 above-normal days).

Participants' overall equity holdings increased significantly due to positive market movement—up 1.5% to 57.9% by the end of September. For the quarter, change in overall level was also positive, although most of the movement occurred during September. On the other hand, employee-only equity contributions decreased 0.3%, from 59.9% at the end of August to 59.6% at the end of September. For the quarter, they were down 0.7%.

The news release said that during the month, the Dow Jones Industrial Average saw a 7.85% hike, the Russell 2000 a 12.46% increase, and the S&P 500 an 8.92% rise.

More information is here.