Human Resources

401(k) Index & Observations Monthly Details: March 2017


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March and First Quarter 2017 Index Comments

The Aon Hewitt 401(k) IndexTM shows that March ended an overall light quarter of trading activity by 401(k) investors. The first quarter of 2017 saw no days with above-normal1 trading activity-the first time this has happened in a quarter since the Index was established in 1997. Below are detailed observations from March and the first quarter of 2017.

March Review

In March, 401(k) investors had the lightest month of trading activity since September 2016. Overall, net trades totaled just 0.15% of balances in March and there were no days with above-normal trading activity. When investors made trades, they tended to be more conservative; 18 out of 23 trading days had more inflows to fixed income.


Asset Classes with Most Trading Inflows in March

Percentage of Inflows Index Dollar Value ($ mil)
International funds 33% $91
Large U.S. equity funds 20% $55
Money markets funds 19% $53


Asset Classes with Most Trading Outflows in March

Percentage of Outflows Index Dollar Value ($ mil)
Company stock funds 59% $162
Small U.S. equity funds 29% $78
Mid U.S. equity funds 11% $29

After combining contributions, trades, and market activity in investors' accounts, the percentage in equities at the end of March was 66.5%, a slight increase from 66.4% at the end of February. When investors made new contributions, they favored equities with 67.3% of contributions going to equities, up from 66.7% in February.


Asset Classes with Most Contributions in March

Percentage of Contributions Index Dollar Value ($ mil)
Target-date2 funds 40% $708
Large U.S. equity funds 20% $362

Asset Classes with Largest Percentage of Total Balance at end of March

Percentage of Balance Index Dollar Value ($ mil)
Target-date funds 25% $45,345
Large U.S. equity funds 24% $42,911
Stable value funds 12% $21,242

March Market Observations

March was a relatively quiet month for U.S. markets as 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), and U.S. Small-Cap equities (represented by the Russell 2000 Index) all remained virtually flat during the month. However, international equities (represented by the MSCI ACWI ex-U.S. Index) rallied during the month returning 2.5%.


March Indices Returns

March
Bloomberg Barclays U.S. Aggregate Index -0.1%
S&P 500 Index 0.1%
Russell 2000 Index 0.1%
MSCI All Country World ex-U.S.A. Index (net) 2.5%

First Quarter 2017 Review

According to the Aon Hewitt 401(k) IndexTM, net trades for the first quarter of 2017 amounted to 0.43% of balances -- the lowest level since the fourth quarter of 2015. Trading activity favored equity funds, with large U.S. equity, international, and emerging market funds receiving the majority of inflows. Company stock and stable value funds had the largest percentage of outflows.


Asset Classes with Most Trading Inflows in Q1 2017

Percentage of Inflows Index Dollar Value ($ mil)
Large U.S. equity funds 39% $288
International funds 29% $218
Emerging market funds 11% $83


Asset Classes with Most Trading Outflows in Q1 2017

Percentage of Outflows Index Dollar Value ($ mil)
Company Stock 47% $351
Stable value funds 30% $223
Bond funds 10% $76
Small U.S. equity funds 10% $72

First Quarter 2017 Market Observations

During the first quarter of 2017, equity returns were strong while fixed income returns were stable. International equities (represented by the MSCI ACWI ex-U.S. Index) earned nearly 8% during the quarter while U.S. Large-Cap equities (represented by the S&P 500 Index) returned over 6%. Small-Cap equities (represented by the Russell 2000 Index) experienced modest returns during the quarter of 2.5%, while U.S. bonds (represented by the Barclays Capital U.S. Aggregate Bond Index) had a slightly positive return of 0.8%.


First Quarter 2017 Indices Returns

2017 Q1
Bloomberg Barclays Capital U.S. Aggregate bond Index 0.8%
S&P 500 Index 6.1%
Russell 2000 Index 2.5%
MSCI All Country World ex-U.S. Index (net) 7.9%

Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending March 31, 2017:

Index Statistics

March 2017 Q1 2017 YTD
Total Transfers as Percent of Starting Balance: 0.15% 0.43% 0.43%
# Fixed Days: 18(78%) 31(50%) 31(50%)
# Equity Days: 5(22%) 31(50%) 31(50%)
# Above Normal* Days: 0 0 0

Indices Returns

March 2017 Q1 2017 YTD
Bloomberg Barclays Capital U.S. Aggregate Bond Index -0.1% 0.8% 0.8%
S&P 500 Index 0.1% 6.1% 6.1%
Russell 2000 Index 0.1% 2.5% 2.5%
MSCI All Country World ex-U.S. Index (net) 2.5% 7.9% 7.9%

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) 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.
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.



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