Human Resources
401(k) Index &  Observations Monthly Details: January 2015

401(k) Index & Observations Monthly Details: January 2015

Market Commentary

  • A volatile start to the year on Wall Street fueled higher-than-usual trading activity among defined contribution plan participants in January. According to Aon Hewitt’s 401(k) IndexTM, there were five days of above-normal1 trading activity in the month–more days than the previous two months combined. Overall, 0.027% of total assets traded in January. The majority of days (75%) favored equities over fixed income assets, which is the highest percentage of days per month that has favored equities in two years.
  • When participants made trades they transferred out of GIC/Stable value, money market funds and target-date2 funds and transferred into bonds, company stock and specialty/sector funds. Target-date funds continue to receive the majority of new contributions into individuals’ accounts.

Asset Classes with Most Trading Outflows

Percent of Outflows Index Dollar Value ($ mil)
GIC/Stable value funds 51% $184
Money market funds 22% $78
Target-date funds 17% $63

Asset Classes with Most Trading Inflows

Percent of Inflows Index Dollar Value ($ mil)
Bond funds 27% $98
Company stock funds 23% $83
Specialty/Sector funds 21% $77

Asset Classes with Most Contributions

Percent of Contributions Index Dollar Value ($ mil)
Target-date funds 39% $569
Large US equity funds 19% $276
GIC/Stable value funds 8% $122

  • Combining contributions, trades and market activity, participants’ overall allocation to equities decreased to 65.6% from 66.4% in January. Future contributions to equities increased marginally month-over-month from 66.1% to 66.4%.
  • The global equity markets had an unstable start to the year. The S&P 500 Index, a measure of U.S. large-cap equities, had its worst monthly showing since January 2014, returning -3.0%. Small-cap equities also had a rough month as the Russell 2000 Index returned -3.2%. Non-U.S. equities performed better than their U.S. counterparts during January but still declined, returning -0.2%. The Barclays U.S. Aggregate Index, a measure of the fixed income market, returned 2.1% during the month.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending January 31, 2015.

Index Statistics

January 2015 YTD
Average Daily Net Activity 0.027% 0.027%
Number of Fixed Income Days 5 (25%) 5 (25%)
Number of Equity Days 15 (75%) 15 (75%)
Number of Above-Normal1 Days 5 5

Indices Returns

January 2015 YTD
Barclays Capital U.S. Aggregate Bond Index 2.1% 2.1%
S&P 500 -3.0% -3.0%
Russell 2000 Index -3.2% -3.2%
MSCI All Country World ex-U.S. Index (net) -0.2% -0.2%

1A “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 2 times the average daily net activity of the preceding 12 months.
2Target-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.