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Aon Hewitt 401(k) Index &  Observations Monthly Details: December 2012 | Aon

Aon Hewitt 401(k) Index & Observations Monthly Details: December 2012


Market Commentary

  • Daily transfer volume was above average among defined contribution plan participants in December, according to the results of the Aon Hewitt 401(k) Index™. Transfers averaged 0.027% of total balances daily—higher than the trailing 12-month average at 0.024%. December’s count of four days with transfer activity above normal* was surpassed only by November during 2012.
  • Total net transfer activity was high in December, totaling $426 million or 0.32% of total participant balances. While not as high as November’s total, it shows participants continue to take more action than earlier parts of the year.
  • The month of December proved to be volatile as investors debated whether the U.S, would go over the Fiscal Cliff and how that might impact the future growth of U.S. and global economies. On the last day of trading, speculation that lawmakers would reach an agreement to avert the fiscal cliff took the equity markets significantly higher, leading to an overall positive month for most equity markets.
  • Net daily transfers favored fixed income funds for 85% of trading days in December. Transfers into fixed income asset classes from equities totaled $370 million of total flows or 0.27% of total assets. When company stock activity is excluded, equity outflows totaled $240 million (0.18%) of participant balances.
  • Most equity-based asset classes had net outflows in December—similar to November. Leading the way, company stock funds lost $130 million (31%). U.S. funds together took the largest hit with large U.S. losing $124 million (29%), followed by small U.S. funds losing $73 million (17%) and mid U.S. funds losing $42 million (10%). Premixed funds also had $34 million (8%) of outflows.
  • For net inflows in December, GIC/stable value funds gained the most with $251 million (59%) transferring in. In addition, bond funds received $75 million (18%) and money market funds took $63 million (15%) of the monthly inflows. International funds, the only asset class of equities with inflows, had $36 million (9%) of inflows.
  • Employee discretionary contributions, another measure of participant sentiments, declined to 61.7% in equities for December, This is down from the November average at 62.3%.
  • Despite the sizable transfers into fixed income, participants’ overall equity allocation moderately increased 0.2% to reach 59.4% by the end of December.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending December 31, 2012.

Index Returns

December 2012 Q4 2012 YTD
Barclays Capital Aggregate Bond Index -0.14% 0.22% 4.22%
S&P 500 0.91% -0.38% 16.00%
Dow Jones Industrial Average 0.79% -2.15% 9.78%
Russell 2000 Index 3.56% 1.85% 16.35%
NASDAQ Index 0.63% -2.72% 17.43%
MSCI EAFE Index 3.20% 6.57% 17.32%
MSCI Emerging Markets Index (Net) 4.89% 5.58% 18.23%

Index Statistics

December 2012 Q3 2012 YTD
Average Daily Net Activity 0.027% 0.024% 0.024%
Number of Fixed Income Days 17 (85%) 51 (82%) 163 (65%)
Number of Equity Days 3 (15%) 11 (18%) 87 (35%)
Number of Above Normal Days 4 10 23

*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.

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