Stable Value Options Top September Allocations in Hewitt Index

October 15, 2002 ( - Slumping equity markets took the winds out of participant stock holdings during September, leaving participant equity holdings at the lowest level in the history of the Hewitt 401(k) Index.

Company stock slid to 24.5% overall, and large US equity fell to 17.33% – a combination that helped take stock investments in the Index to the lowest level in the history of the Hewitt index, 57.2%.   A year ago, stock investments comprised more than two-thirds of participant balances – in late 2000, they made up nearly three-quarters of the total (see  2001 Participant Activity Light Despite Market Tumult ).

At the same time that stocks were sliding, GIC/stable value options continued to grow in popularity.   Nearly 28% of the participant balances tracked by the Hewitt index were in those type options, compared to roughly 26% in August (see August Transfers Slow – Some ).    

Balanced funds held 9.43%, bond funds 5.73%, lifestyle/pre-mixed funds another 4.52%, and money market options drew 3.5%.

Contributing Factors

Those overall allocations were as much the product of market forces as any real shift in participant election, however.   Company stock still drew nearly 26% of new contributions, considerably higher than the 20% the month before.   Large US equities also continued to pull in a strong 21%, although that was down from the 24% a month ago.   GIC/stable funds pulled in 17.25%, while balanced, bond, and lifestyle options drew about 6% each.

There was only one “high” trading volume day during the month, September 5, when volumes were about twice as high as normal.   Participants transferred favored fixed income investments on that day, on a net basis.   On that day the S&P 500, Dow and NASDAQ all notched their fifth consecutive loss in six trading sessions.

Transfer Tracking

Net transfers favored fixed income alternatives on 12 of the 20 trading days during the month.   Trading volume was normal on most days, save for the high volume on September 5, and moderately high volumes recorded on September 4 and September 25.   Transfer activity, on the whole, was only a bit above normal, according to Hewitt, which noted that monthly net daily transfer activity averaged 0.08% of balances.

Hewitt regards a “normal” level of relative transfer activity as when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity, while a “moderate” reading occurs when the net daily movement is between 1.5 and two times the average daily net activity of the preceding 12 months.