About Alight Solutions 401(k) Index™

October 12, 2017

What is the Alight Solutions 401(k) Index?

The Alight Solutions 401(k) Index tracks the investment activity of 401(k) plan investors at large employers. Created in 1997, the Alight Solutions 401(k) Index serves as the barometer of daily 401(k) investment activity, with daily data on over 2 million 401(k) investors who have roughly $200 billion in collective assets. The Alight Solutions 401(k) Index tracks the daily transfer activity among 13 asset classes, reporting the flow of money into and out of these asset classes and how it relates the data to daily stock market activity, providing a glimpse into how specific world and market events, such as a stock market dip, affects 401(k) plan investors and their investment decisions.

How does Alight Solutions create the 401(k) Index?

Alight Solutions creates the Alight Solutions 401(k) Index through a four-step process:

(1) First, Alight Solutions computes the total amount of money moved by investors between 13 asset classes on a daily basis (activity level). In this process, we count the dollars moving between asset classes only once (dollars are counted moving into and out of self-directed window; but transfers within self-directed window are not counted). Each of these amounts is then restated as a percent of the total dollars (the day’s beginning balance) in all 13 asset classes.

(2) Next, Alight Solutions computes an average of these daily numbers for the last 12 months and up to the day before the index is computed. This average represents "normal" activity and is computed on a rolling basis, changing daily as the Index moves forward.

(3) The Alight Solutions 401(k) Index also calculates a ratio of transfer activity on a given day relative to the average computed in step (2), to which a classification is given for the severity of the movement; low, normal, moderate, and high.

(4) Finally, Alight Solutions incorporates a directional indicator representing where the majority of money on that day flowed, into equity funds or fixed income funds.

How can the Alight Solutions 401(k) Index be interpreted?

An Alight Solutions 401(k) Index reading of 1.0 is equal to a day of average trading activity (based on transfer activity over the last year). An Alight Solutions 401(k) Index reading higher than 1.0 (i.e. 1.78) indicates a day of higher than normal transfer activity; while an Alight Solutions 401(k) Index reading less than 1.0 (i.e. 0.45) indicates lower transfer activity than normal. This is accompanied with a directional indicator to depict where the majority of money moved for that day.

For example, an Alight Solutions 401(k) Index of 1.8 for the transfer activity for that day with a direction towards equities is 80 percent higher than usual, with the majority of money went into equity funds. Likewise, an Alight Solutions 401(k) Index of .60 for the transfer activity with direction towards fixed income indicates a 40 percent lower than usual activity level, with money flowing into fixed income funds.

Is the Alight Solutions 401(k) Index representative of all 401(k) investors?

No. The Alight Solutions 401(k) Index is representative of employees of large plan sponsors.

Where does Alight Solutions obtain the data to create the Alight Solutions 401(k) Index?

Alight Solutions 401(k) Index is created from a subset of our clients, one of the largest outsourcing providers in the U.S., providing pension, 401(k), and health care.

Why did Alight Solutions create the Alight Solutions 401(k) Index?

Alight Solutions created the Alight Solutions 401(k) Index to provide some insight into the investing habits of 401(k) investors. The Alight Solutions 401(k) Index makes it possible to reflect on the behavior of these 401(k) investors.

How do people access the Alight Solutions 401(k) Index?

The Alight Solutions 401(k) Index can be viewed online.

How often is the Alight Solutions 401(k) Index updated online?

Monthly observations are posted in the first few weeks of each month. Alight also publishes quarterly and annual commentary on the Index.

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