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401k

401(k) Index Observations Monthly Details: August 2012


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Market Commentary

  • Defined contribution plan participants transferred monies from equities into fixed income investments in August, according to the Aon Hewitt 401(k) Index™. Overall, 74% of the days in August had transfer activities that favored fixed income funds representing $277 million in total inflows or 0.2% of total assets. However, when company stock activity is excluded, total equity outflows amounts to just $122 million (0.1%) of participant balances.
  • As the remaining second quarter earnings reports came out in August, major equity indices generally experienced gains for the month. Federal Reserve Chairman Ben Bernanke reiterated that the Fed stands ready to take action should economic conditions lapse. Despite Mr. Bernanke’s promise to support the economy, both high unemployment in the U.S. and the European debt crisis continued to weigh on investor confidence. The Index confirms much participant uncertainty in August as daily transfer volumes remained very low compared to historical levels. On average, only 0.021% of balances transferred on a net daily basis, which is similar to the volume of transfers over the past three months. August had just one day of above-normal* transfer level—identical with July. Another month of low transfer activity further diminished the trailing 12-month daily average, which dropped to 0.027%.
  • In net outflows, company stock funds lost $155 million (49%), small U.S. equity funds lost $93 million (29%), and mid-U.S. equity funds lost $23 million (7%) for the month.
  • All fixed income asset classes recorded net inflows in August. Similar to last month, bond funds received the most inflows with $327 million (41%), while GIC/stable value funds took in $80 million (25%) and money market funds received $49 million (16%). The lifestyle/pre-mixed asset class also had $38 million of inflows.
  • As another measure of participant sentiment, employee-only contributions showed a slight decline from 62.3% in equities to 62.1% at the end of August.
  • Participants’ overall equity allocation increased by 0.4% to 59.5% at the end of August, due to the market gains among most equity asset classes.

The following tables show Aon Hewitt 401(k) Index statistics and the returns of major market indices for the month of August 2012:

Index Returns

August 2012 YTD
Dow Jones Industrial Average 1.04% 9.18%
Russell 2000 Index 3.33% 10.60%
Barclays Capital Aggregate Bond Index 0.07% 3.85%
S&P 500 2.25% 13.51%
MSCI EAFE Index 2.69% 6.92%
NASDAQ Index 4.55% 18.70%
MSCI Emerging Markets Index (Net) -0.33% 5.62%

Index Statistics

August 2012 YTD
Average Daily Net Activity 0.021% 0.024%
Number of Fixed Income Days 17 (74%) 98 (58%)
Number of Equity Days 6 (26%) 71 (42%)
Number of Above Normal Days 1 9

 

*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.


Index Data Reports

Relative Transfer Activity (August 2012)

Asset Allocation - Supporting Data (August 2012)

Balances in Stock Investments (August 2012)

Monthly Details: Aon Hewitt 401(k) Index™ Observations