SURVEY SAYS: What Fund(s) Are Drawing YOUR Participant Transfers?

Perhaps you have also noticed that the participants tracked by Hewitt who moved money these past several months (admittedly a small percentage of the total population) have demonstrated a decided preference for international and emerging market choices – and little wonder, considering their performance numbers.   This week I asked where YOUR participants were transferring.

Perhaps establishing that some participants ARE paying attention, a full third of this week’s respondents said that transferring participants were favoring international equities on their retirement plan menu (however, one respondent characterized that shift as “chasing past performance in international” ).   The second most popular option was lifestyle/lifecycle funds, the top choice of transferring participants in roughly 18% of responding plans.   One respondent noted, “We added lifecycle funds to our product offering last year and we’ve seen a great deal of money transfer into those funds ever since. They work great for the average Joe.”

However, keeping those figures in some perspective, more than 22% said that “nobody” was transferring, while another 12% said they didn’t know what participants were doing (as one said, If I’m lucky, I may have that data in July”).   Among the “nobody’s transferring” group was the reader who noted that most of their participants were “…happy with where the market has gone the past few months and are staying put.   Our advisers preach “stay the course” and I think participants are adhering.”   Another noted, “I’d like to say that the answer is some or all of the above, however the answer is inevitably (K).”

One reader noted, “To the best of my knowledge I would have to say (k) (nobody is transferring)” – but then went on to admit, “Now have you ever noticed that when one starts a sentence with “to the best of my knowledge” the answer should be (j) no idea?

As for the remaining 15% – they split nearly evenly between large-cap equities, small-cap equities, and fixed income/stable value.   As one respondent noted, “Most transfers recently are going into the Stable Value category (we have an older group that is getting closer to retirement).”

A number of readers knew where participants were moving – but didn’t seem altogether sure as to the rationale behind those moves.   One noted simply, “Our participants are going into (a) international, and (e) stable value.   Go figure.”

While I didn’t specifically ask about the funds that were suffering outflows, an informal assessment of the responses suggests that S&P 500 offerings and company stock were taking most of the hit, and perhaps with reason.   One reader noted that “It appears as though participants are chasing (or running away from in the case of Company Stock!) returns.   I guess they believe that “past performance IS an indicator of future performance”!”

But this week’s Editor’s Choice goes to the reader who said “…our participants don’t transfer much; about half as much as average according to Hewitt figures. In the first quarter they transferred into a mid-cap growth and a lifestyle growth. But then we don’t have either an international or a small-cap option. So I guess you can put me down for g, I, and k. and wishin’ we had an a and b option.”

Thanks to everyone who participated in our survey!