Human Resources
401(k) Index &  Observations Monthly Details: September 2014

401(k) Index & Observations Monthly Details: September 2014

Market Commentary

  • While all of the major asset classes suffered losses during the month of September, Aon Hewitt’s 401(k) Index™ shows light trading by participants. In September, 0.021% of balances transferred, marking the eleventh consecutive month that trading activity was below 0.03%. Total transfer activity was $297 million or 0.18% of total assets, with two days having above normal trading activity*.
  • Plan participants favored equity funds over fixed income funds for 55% of the trading days in September. Overall, transfer activity moved away from diversified equities (equity assets excluding company stock) by $101 million (0.06%). For the quarter ending September 30, 51% of trading days favored equity funds.
  • Lifestyle/premixed funds saw the most inflows with $129 million (44%), large U.S. equity funds received $59 million (20%) and international funds took in $36 million (12%). Company stock funds lead the net outflow activity with $212 million (71%), followed by small U.S equity and mid U.S. equity with $45 million (15%) and $34 million (11%), respectively, transferring out for the month.
  • After incorporating trading and market activity, participants’ overall allocation to equities decreased marginally to 65.5% from 65.9% last month. Future contributions to equities increased marginally to 67.0% from 66.5%.
  • The domestic equity markets struggled in September, as the S&P 500 Index returned -1.4% during the period. U.S. small cap stocks, as measured by the Russell 2000 Index, lagged their large cap counterparts, returning -6.1%. Non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, decreased by -4.8%. After posting seven consecutive months of positive performance, the MSCI Emerging Markets Index was the worst performing index in September, posting a return of -7.4%. The Barclays U.S. Aggregate Index, a measure of the fixed income market, also posted negative performance during the month with a return of -0.7% as the 10-Year Treasury yield interest rates increased.
  • While volatility returned to the equities markets in the third quarter, very little money was transferred with an average net activity of 0.20% of balances and three days above normal trading levels*. On the equity front, September reversed almost all of the gains of July and August with the S&P 500 posting a slightly positive return of 1.1%. U.S. small cap stocks underperformed their large cap counterparts during the period, as the Russell 2000 Index lost -7.4%. Non-U.S. stocks lost ground in the quarter as the MSCI All Country World ex-U.S. Index and the MSCI Emerging Markets Index decreased by -5.3% and -3.5%, respectively. U.S. bonds, as measured by the Barclays U.S. Aggregate Index, were able to eke out a small gain during the quarter, returning 0.2%.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending September 30, 2014.


Index Statistics

September Q3 2014 YTD
Average Daily Net Activity 0.021% 0.020% 0.022%
Number of Fixed Income Days 9 (45%) 29 (49%) 97 (53%)
Number of Equity Days 11 (55%) 31 (51%) 87 (47%)
Number of Above Normal Days 2 3 12


Index Returns

September Q3 2014 YTD
Barclays Capital Aggregate Bond Index -0.7% 0.2% 4.1%
S&P 500 -1.4% 1.1% 8.3%
Russell 2000 Index -6.1% -7.4% -4.4%
MSCI All Country World ex-U.S. Index (net) -4.8% -5.3% 0.0%

*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 Aon Hewitt 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.