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Fixed Income Favored in October 401(k) Trading

October turned out to be a pretty rough month for stocks — so how did 401(k) participants respond?

Not much — as generally turns out to be the case — and those who did respond moved toward fixed income options.

October was another light month of trading for 401(k) investors. According to the Aon Hewitt 401(k) Index, only 0.16% of total balances traded in the month and there were just two days of above-normal trading activity. When participants made trades, 15 out of 21 trading days favored fixed income funds over equity funds. A “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Aon Hewitt 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

GIC/stable value funds were the primary beneficiary of those inflows, attracting 36% of the inflows (though only $98 million), but international funds were second-most popular, garnering nearly a quarter (23%), some $62 million, ahead of the 20% that found its way to money market funds.

As for where those monies came from, a plurality (42%), some $115 million came from company stock funds, while about a quarter (23%) was transferred from large U.S. equity funds ($63 million), and one in five transferring balances came from mid-U.S. equity funds.

New contributions continued to trend toward target-date funds, some $356 million (42%) worth, with another 19% directed toward large U.S. equity funds ($162 million).

The Aon Hewitt 401(k) Index tracks the 401(k) trading activities of nearly 1.3 million participants, representing nearly $160 billion in collective assets.

At the end of the month, the 24% in target-date funds made it the largest asset class (by percentage) in the AonHewitt 401(k) Index, followed by large U.S. equity funds (22%), and GIC/stable value funds (13%).