Notwithstanding market volatility and concerns about rising inflation and the Omicron variant, November apparently was another light trading month for 401(k) investors.
On average, net daily trading activity was 0.009% of 401(k) balances and there were no days of above-normal activity, according to the latest Alight Solutions 401(k) Index, which tracks the 401(k)-trading activity of over 2 million people with more than $200 billion in collective assets.
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 Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
When participants did make trades, two-thirds of the days (14 out of 21) saw net trading activity favor equity funds over fixed income. Compared with last year, the 2021 year-to-date data appears to be more even in terms of funds favored, with 123 days (or 53%) favoring fixed income and 107 days (or 47%) favoring equity. In contrast, Alight’s data for 2020 shows 184 days (73%) favoring fixed income, compared to 69 days (27%) favoring equity.
In addition, there have been only two days of above-normal trading so far in 2021. At this time last year, there were 47 above-normal days, with the large majority of those coming in the first half of the year.
Inflows and Outflows
Trading inflows for November mainly went to large U.S. equity, bond and international equity funds, while outflows were primarily from stable value, target date and money market funds.
According to Alight’s data, large U.S. equity funds collected the highest percentage of trading inflows for the month, at 45% for an index dollar value of $97 million, while 24% went to bond funds (or $50 million) and 13% went to international equity funds (or $27 million).
The largest asset class with most trading outflows went to stable value funds, at 41% for an index value of $88 million, followed by target date funds at 25% (or $52 million) and money market funds at 12% (or $26 million).
After reflecting market movements and trading activity, the average asset allocation in equities decreased from 70.5% in October to 70.1% in November, Alight’s Index further shows. At the same time, new contributions to equities increased from 69.2% in October to 69.7% in November.
As usual, asset classes with most contributions in November included target date funds, at 48% for an index value of $512 million, followed by large U.S. equity funds at 21% (or $220 million) and international equity funds at 7% (or $78 million).
Market Performance
Meanwhile, the November market returns for common indices were less encouraging. U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) was the only one in Alight’s Index that had a positive result for November at 0.30%. Still, its 2021 year-to-date results show that the index is down at -1.29%.
In comparison, U.S. large equity (represented by the S&P 500 Index) was down -0.69% for November, but is up 23.18% for the year. U.S. small equity (represented by the Russell 2000 Index) was also down—4.17% for the month—but remains up 12.31% for the year.
International equity (represented by the MSCI All Country World ex-U.S. Index) registered the largest decrease for both the month of November and the year-to-date, at -4.50% and -4.34%, respectively.
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