401(k) Index & Observations Monthly Details: March 2016
March 2016 Review
According to the Aon Hewitt 401(k) IndexTM, March saw 401(k) investors continue to be more conservative with their retirement investments. In total, 0.25% of balances traded in March—up slightly from 0.21% in February. There was one day of above-normal1 trading activity.
The asset classes with the most inflows were fixed income funds and the funds with the most outflows were primarily equity funds. Seventeen out of 22 trading days showed more inflows to fixed income.
Asset Classes with Most Trading Inflows in March
|
Percent of Inflows |
Index Dollar Value ($ mil) |
| GIC/Stable value funds |
37% |
$146 |
| Bond funds |
33% |
$129 |
| Money market funds |
22% |
$88 |
Asset Classes with Most Trading Outflows in March
|
Percent of Outflows |
Index Dollar Value ($ mil) |
| Large U.S. equity funds |
37% |
$146 |
| Company Stock funds |
32% |
$127 |
| Small U.S. equity funds |
9% |
$37 |
| International funds |
9% |
$35 |
After combining contributions, trades, and market activity in participants’ accounts, the percentage in equities rose to 64.8% at the end of March, slightly up from 64.0% at the end of February. New contributions still favor stocks, but the contributions to equities remained flat at 66.0% at the end of March, a slight change from 65.9% at the end of February.
Asset Classes with Most Contributions in March
|
Percent of Contributions |
Index Dollar Value ($ mil) |
| Target-date2 funds |
37% |
$597 |
| Large U.S. equity funds |
20% |
$316 |
Asset Classes with Largest Percentage of Total Balance at end of March
|
Percent of Balance |
Index Dollar Value ($ mil) |
| Target-date funds |
23% |
$38,682 |
| Large U.S. equity funds |
22% |
$36,950 |
| GIC/stable value funds |
13% |
$21,946 |
First Quarter 2016 Review
A volatile start to the year on Wall Street created the busiest trading quarter in nearly three years for participants in defined contribution plans. As a percent of balances, 0.82% of balances traded in the first quarter of 2016—well ahead of Q4 2015’s figure of 0.36% and the highest level since Q3 2013.
Trading activity favored fixed income instruments with GIC/stable value and bond funds receiving the majority of the inflows. Target-date funds and Large U.S. equity funds had the largest percentage of outflows.
Asset Classes with Most Trading Inflows in Q1 2016
|
Percent of Inflows |
Index Dollar Value ($ mil) |
| GIC/Stable value funds |
43% |
$585 |
| Bond funds |
37% |
$493 |
| Money market funds |
17% |
$224 |
Asset Classes with Most Trading Outflows in Q1 2016
|
Percent of Outflows |
Index Dollar Value ($ mil) |
| Target-date funds |
28% |
$379 |
| Large U.S. equity funds |
27% |
$357 |
| Company Stock |
18% |
$247 |
Market Observations
- For the month of March, U.S. bonds (represented by the Barclays Capital U.S. Aggregate Bond Index), U.S. Large-Cap equities (represented by the S&P 500 Index), U.S. Small-Cap equities (represented by the Russell 2000 Index), and International equities (represented by the MSCI ACWI ex-US Index) all had positive returns.
- In the first quarter of 2016, market returns were mixed. U.S. bonds (represented by the Barclays Capital U.S. Aggregate Bond Index) and U.S. Large-Cap equities (represented by the S&P 500 Index) had positive returns, while U.S. Small-Cap equities (represented by the Russell 2000 Index) and International equities (represented by the MSCI ACWI ex-US Index) experienced negative returns.
Aon Hewitt 401(k) IndexTM statistics and the returns of major market indices for periods ending March 31, 2016:
Index Statistics
| Total Transfers as Percent of Starting Balance |
0.25% |
0.82% |
0.82% |
| Number of Fixed Income Days |
17 (77%) |
45 (74%) |
45 (74%) |
| Number of Equity Days |
5 (23%) |
16 (26%) |
16 (26%) |
| Number of Above-Normal1 Days |
1 |
8 |
8 |
Indices Returns
| Barclays Capital U.S. Aggregate Bond Index |
0.9% |
3.0% |
3.0% |
| S&P 500 Index |
6.8% |
1.4% |
1.4% |
| Russell 2000 Index |
8.0% |
-1.5% |
-1.5% |
| MSCI All Country World ex-U.S. Index (net) |
8.1% |
-0.4% |
-0.4% |
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.