Alight Solutions 401(k) Index Full Year 2018 Observations

January 8, 2019

According to the Alight Solutions 401(k) IndexTM, 2018 was an interesting year for trading activity among 401(k) investors. On the one hand, participants were very active during the year, with 46 days of above-normal1 daily transfer activity--the highest number of above-normal days in the last five years, much higher than the 13 days of above-normal trading in 2017. On the other hand, net trades in 2018 amounted to only 1.42% of total plan balances, making 2018 a record low year for trading activity in the over 20-year history of the Index.

This apparent discrepancy is attributed to the fact that many of the high trading activity days were concentrated around the beginning of the year and toward the end of the year, with the trades moving in opposite directions. Investors started the year in January with a rush to equities. The first seven trading days of the year and 18 of the first 28 trading days were above-normal with nearly universal movement from fixed income investments to equity funds. However, investors reversed this trend in December when Wall Street plummeted. During the seven-day stretch when the Dow dropped by at least 350 points six times, every day was an above-normal day with money flowing from equities to fixed income. In essence, these trades canceled out the actions from the beginning of the year.

 

Asset classes with most trading inflows in 2018 Percentage of inflows Index dollar value
($ mil)
Stable value funds 56% $1,628
Money market funds 19% $542
Bond funds 13% $392

 

 

Asset classes with most trading outflows in 2018 Percentage of outflows Index dollar value
($ mil)
Target date funds2 53% $1,545
Company stock 22% $648
Large U.S. equity funds 13% $368

 

 

Asset classes with most contributions in 2018 Percentage of contributions Index dollar value
($ mil)
Target date funds 46% $6,566
Large U.S. equity funds 20% $2,823
International funds 8% $1,149

 

 

Percentage of balances by asset class Year end 2018 Year end 2017 Change
Money market 1.2% 1.1% 0.1%
Stable value 11.2% 10.1% 1.1%
Bond 8.0% 7.5% 0.5%
Balanced 2.1% 2.3% (-0.2%)
Target date funds 28.0% 27.2% 0.8%
Large cap U.S. equity 24.1% 23.8% 0.3%
Mid cap U.S. equity 4.7% 5.2% (-0.5%)
Small cap U.S. equity 3.0% 3.2% (-0.2%)
International 6.9% 8.1% (-1.2%)
Emerging markets 1.3% 0.7% 0.6%
Specialty/sector 0.5% 0.6% (-0.1%)
Company stock 6.9% 8.2% (-1.3%)
Self-directed brokerage 2.1% 2.0% 0.1%
       
Asset type Year end 2018 Year end 2017 Change
Equity 66.6% 68.6% (-2.0%)
Fixed income 33.4% 31.4% 2.0%

 

After reflecting contributions, trades, and market activity, 401(k) investors ended 2018 with 66.6% in equities, down from 68.6% at the beginning of the year.

 

Index statistics 2018
Total transfers as percentage of starting balance 1.42%
# Fixed days 155(62%)
# Equity days 96(38%)
# Above normal days 46

 

The following table shows the returns of major market indices for the year ending December 31, 2018:

 

Returns of common indices 2018
Bloomberg Barclays Capital U.S. Aggregate Index 0.0%
S&P 500 Index -4.4%
Russell 2000 Index -11.0%
MSCI All Country World ex-U.S.A. Index (net) -14.2%

 

Members of the media: please contact MacKenzie Lucas for questions about the Alight Solutions 401(k) Index™.

Learn more about the Alight Solutions 401(k) Index here.

  1. 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 Alight Solutions 401(k) Index™ equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and two times the average daily net activity of the preceding 12 months.
  2. Target date funds also include the amounts in target risk funds for companies who do not have target date funds. The amount in the target risk funds is less than 10% of the total.

Download a version of this report

 Download now

 

 

 

Previous Article
Cut company health care costs today - implement new initiatives tomorrow
Cut company health care costs today - implement new initiatives tomorrow

Watch our on-demand webinar, Cut company health care costs today- implement new initiatives tomorrow, to le...

Next Article
 Alight Solutions 401(k) Index: Fourth Quarter 2018 Observations
Alight Solutions 401(k) Index: Fourth Quarter 2018 Observations

According to Alight Solutions, 401(k) trading activity was very active during fourth quarter 2018 —a sharp ...