Transfers Trend Higher, Toward Fixed Income

September 24, 2001( - Participant in 401(k) plans reacted to one of the US stock market's worst weeks ever, increasing investment transfer activity and continuing to shift investments from equities to fixed income.

The Hewitt 401(k) index, which tracks the daily transfer activity of some 1.5 million US employees, saw the highest amount of transfer activity the day the market resumed trading following the terrorist attacks on New York and Washington DC, when daily net transfer activity reached 0.58% of total balances, nine times the normal level.

Although transfer activity returned to normal levels on Tuesday last week, the Index recorded two additional days of high activity on Thursday and Friday, both roughly three times the normal level of transfer activity.

What’s Normal?

Normal daily net transfer activity is generally low, averaging 0.06% over the past 12 months. Last week, weekly net transfer activity was 1.15%, compared to normal weekly net transfer activity of 0.33%

Nevertheless, Hewitt points out that a 1% increase is not a huge shift in sentiment, and the majority of participants didn’t transfer funds, and those who did moved money from equities into fixed income.

Market Correlation?

Overall transfer activity closely tracked market activity, with daily net transfers increasing in line with the amount that the market decreased each day last week.

In dollar terms, nearly $900 million of the total $71 billion in 401(k) assets tracked were transferred. Transfer activity, combined with the decline in stock values, brings the overall equity exposure of the Index down to 63.3%. Typically the Index’s equity exposure averages at 71.5%

The Hewitt 401(k) Index is a barometer of daily 401(k) investment activity, tracking transfer activity of employees in large employer plans.