401(k) Index & Observations Monthly Details: January 2016
January 2016 Review
As stocks tumbled in January, 401(k) plan participants were busy making trades, according to the Aon Hewitt 401(k) IndexTM. January had six days of above-normal1 trading activity and saw 0.39% of balances traded in the month—well above December’s value of 0.14% and the highest level since January 2013.
Participants’ heavily favored fixed income over equities when they made trades with 82 cents of every dollar traded going from an equity instrument to a fixed income fund. Additionally, 14 out of 19 (74%) of the trading days showed more inflows to fixed income.
After reflecting contributions, trades, and market activity in participants’ accounts, the percentage in equities decreased to 64.1% at the end of January, down from 65.4% at the end of December. Despite the movement of current balances to more conservative investments, participants were still keen on investing new money in stocks as contributions to equities increased to 66.3% from 63.7% in December.
Asset Classes with Most Trading Inflows in January
|
Percent of Inflows |
Index Dollar Value ($ mil) |
GIC/stable value funds |
54% |
$348 |
Bond funds |
27% |
$172 |
Money markets funds |
17% |
$106 |
Asset Classes with Most Trading Outflows in January
|
Percent of Outflows |
Index Dollar Value ($ mil) |
Target-date2 funds |
39% |
$251 |
Large U.S. equity funds |
22% |
$145 |
Small U.S. equity funds |
9% |
$58 |
Asset Classes with Most Contributions in January
|
Percent of Contributions |
Index Dollar Value ($ mil) |
Target-date funds |
41% |
$514 |
Large U.S. equity funds |
18% |
$228 |
Asset Classes with Largest Percentage of Total Balance at end of January
|
Percent of Balance |
Index Dollar Value ($ mil) |
Target-date funds |
23% |
$36,497 |
Large U.S. equity funds |
22% |
$34,902 |
GIC/stable value funds |
14% |
$21,772 |
Market Observations
Most January market returns declined:
- U.S. Small-Cap equities (represented by the Russell 2000 Index), U.S. Large-Cap equities (represented by the S&P 500 Index), and International equities (represented by the MSCI ACWI ex-US Index) had negative returns.
- Bond index funds (represented by the Barclays Capital U.S. Aggregate Bond Index) had positive returns.
Aon Hewitt 401(k) IndexTM statistics and the returns of major market indices for periods ending January 31, 2016:
Index Statistics
Total Transfers as Percent of Starting Balance |
0.39% |
0.39% |
Number of Fixed Income Days |
14 (74%) |
14 (74%) |
Number of Equity Days |
5 (26%) |
5 (26%) |
Number of Above-Normal* Days |
6 |
6 |
Indices Returns
Barclays Capital U.S. Aggregate Bond Index |
1.4% |
1.4% |
S&P 500 Index |
-5.0% |
-5.0% |
Russell 2000 Index |
-8.8% |
-8.8% |
MSCI All Country World ex-U.S. Index (net) |
-6.8% |
-6.8% |
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 Aon Hewitt 401(k) IndexTM 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.
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.