Alight Solutions 401(k) Index™: August 2017 Observations

September 13, 2017 Shruti Patel

August showed an uptick in 401(k) trading activity among defined contribution plan investors, according to the Alight Solutions 401(k) Index™. There were three days of above normal1 trading activity in August, equal to the total number of above normal days from January through July. When making trades, investors generally favored fixed income funds.

“Over the last five years, the Index has averaged 32 above  normal trading days per year.  The fact that there have only been six such days this year speaks to how infrequently participants have been initiating trades. There are likely two main forces at play: inertia on the part of investors and a prolonged upward-trending market.”

– Rob Austin, Director of Research at Alight Solutions

August observations:

  • On average, 0.016% of balances traded each day
  • 18 out of 23 days favored fixed income funds

The Alight Solutions 401(k) Index™ statistics for the month ending August 31, 2017:

Index statistics August 2017 YTD
Total transfers as percentage of starting balance 0.24% 0.95%
# Fixed days 18(78%) 86(51%)
# Equity days 5(22%) 82(49%)
# Above normal1 days 3 6

 

Inflows and outflows during the month:

  • The majority of trading inflows went to fixed income funds; 31% of inflows went to stable value funds, 21% to money market funds, and 17% to bond funds
  • Outflows were primarily from  U.S. equities and company stock

Asset classes with most trading inflows in August

  Percentage of inflows Index dollar value
($ mil)
Stable value funds 31% $143
Money market funds 21% $97
International funds 21% $97
Bond funds 17% $79

 

Asset classes with most trading outflows in August

  Percentage of outflows Index dollar value
($ mil)
Large U.S. equity funds 36% $164
Company stock funds 22% $101
Small U.S. equity funds 17% $79
Mid U.S. equity funds 16% $75

 

August investment portfolios:

  • At the end of August, 67.1% of balances were invested in equities, down slightly from 67.4% at the end of July
  • 67.1% of new contributions were invested in equities, down slightly from 67.3% in July

Asset classes with largest percentage of total balance at end of August

  Percentage of balance Index dollar value
($ mil)
Target date2 funds 26% $48,262
Large U.S. equity funds 24% $44,149
Stable value funds 12% $21,590

 

Asset classes with most contributions in August

  Percentage of contributions Index dollar value
($ mil)
Target date funds 45% $454
Large U.S. equity funds 19% $194
International funds 8% $84

 

August market observations

In August, capital markets saw mostly modest gains for U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index), international equities (represented by the MSCI All Country World ex-US Index), and large U.S. equity funds (represented by the S&P 500 Index). Small U.S. equity funds (represented by the Russell 2000 Index) declined in August.

Returns for common indices

  August 2017 YTD
Bloomberg Barclays U.S. Aggregate Index 0.9% 3.6%
S&P 500 Index 0.3% 11.9%
Russell 2000 Index -1.3% 4.4%
MSCI All Country World ex-U.S. Index (net) 0.5% 18.9%

 

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

  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.

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