"Terrible Tuesday" Triggers Transfers

March 13, 2007 (PLANSPONSOR.com) - Participant traders were relatively sanguine during the month of February - but then "Terrible Tuesday" struck.

On that day – February 27 – the relative net transfer activity for the Hewitt 401(k) index was 4.8 times the usual daily trading level, with monies moving from equities toward fixed income investments.   While that was still just 0.16% of 401(k) plan balances tracked by the index on that day, for the month of February, the daily net transfer activity averaged 0.045% of balances, slightly up from the trailing 12-month average of 0.035%.  

While trading volumes were normal on 15 of the 19 trading days during the month, it also jumped to more than twice the daily average on the first trading day of February – a day when both the Dow and the Russell 2000 set new closing highs (transfers on that day also favored fixed income).

Company stock continued to experience most of the outflows, nearly $311 million – more than 70% of the monthly total, in fact – but the recipients of those flows were much more varied.   Small U.S. equity funds had the largest net inflows in February (roughly 23%), but mid-U.S. equity made up nearly 17% of the inflows, while bond funds (13.77%), lifestyle (13.29%), and international offerings (12.28%) also drew respectable amounts.

Asset Allocation

As the month drew to a close, large US equity continued to dominate the overall asset allocation of plans tracked by the Hewitt 401(k) Index, representing 21.14% of the total.   GIC/Stable Value was close behind with 20%, and Company Stock – despite its high representation in the monthly transfer outflows – still made up 19.58% of the total.   After those categories, the proportions drop off noticeably, with international (8.30%), lifestyle (7.88%), balanced (6.68%), and small US equity (5.99%) representing the next tier.

Company stock drew nearly one-in-four contribution dollars during the month, while large US equity funds captured nearly 18%, and GIC/Stable Value attracted 12.80%.   Also of note were:

  • Lifestyle (10.63%)
  • International (9.67%)
  • Small US equity (6.24%)
  • Brokerage window (4.54%)

Looking only at participant contributions, large US equity also dominated, pulling more than 23%, followed by GIC/Stable Value (14.36%).   Third-most popular was lifestyle funds (13.45%), followed by international offerings, two categories that have been dominant in recent months (see  Post-Holiday Surges Lift Transfer Volumes ).