2017 was the slowest trading year in the 20 year history of the Alight Solutions 401(k) IndexTM. In total, 1.45% of total plan balances were traded during the year, down from 2.13% in 2016. There were 13 days of above-normal1 daily transfer activity in 2017—less than half the number in 2016 (28) and the trailing 5-year and 10-year averages (30 and 32 days, respectively).
Part of the light trading activity can be explained by the prevalence of target date2 funds, the largest asset class in the 401(k) IndexTM. The percentage of assets invested in target date funds grew in 2017 from 24.1% at the beginning of the year to 27.2% by the end of the year. Much of this growth can be attributed to the fact that target date funds receive the lion’s share of new 401(k) contributions. In 2017, 43% of contributions were to target date funds.
Strong investment returns also likely contributed to the light trading activity. 2017 proved to be a generally positive year for investors. Large cap U.S. equities (represented by the S&P 500 Index) and international equities (represented by the MSCI All Country World ex-U.S.A. Index) provided strong returns with little volatility throughout the year. Bonds (represented by the Bloomberg Barclays Capital U.S. Aggregate Bond Index) and small cap U.S. equities (represented by the Russell 2000 Index) experienced periods of volatility but still provided positive returns over the last 12 months.
Asset classes with most trading inflows in 2017
|Percentage of inflows||Index dollar value
|Emerging markets funds||11%||$266|
Asset classes with most trading outflows in 2017
|Percentage of outflows||Index dollar value
|Stable value funds||18%||$461|
|Small U.S. equity funds||16%||$392|
Asset classes with most contributions in 2017
|Percentage of contributions||Index dollar value
|Target date funds||43%||$5,959|
|Large U.S. equity funds||19%||$2,650|
After reflecting contributions, trades, and market activity, 401(k) investors ended 2017 with 68.6% in equities, up from 65.4% at the beginning of the year.
Percentage of balances by asset class
|Year end 2017||Year end 2018||Change|
|Target date funds||27.2%||24.1%||3.1%|
|Large cap U.S. equity||23.8%||22.6%||1.2%|
|Mid cap U.S. equity||5.2%||5.0%||0.2%|
|Small cap U.S. equity||3.2%||3.9%||(-0.7%)|
|Total transfers as percentage of starting balance||1.45%|
|# Fixed days||132(53%)|
|# Equity days||119(47%)|
|# Above normal days||13|
The following table shows the returns of major market indices for the year ending December 31, 2017:
|Bloomberg Barclays Capital U.S. Aggregate Bond Index||3.5%|
|S&P 500 Index||21.8%|
|Russell 2000 Index||14.7%|
|MSCI All Country World ex-U.S.A. Index (net)||27.2%|
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.
Download a version of this report