Human Resources

401(k) Index & Observations Monthly Details: July 2012


Market Commentary

  • Average net transfer activity remained very low among defined contribution plan participants in July, as the Aon Hewitt 401(k) Index™ reports just 0.024% of balances transferred daily. This is similar to June and also below the 12-month trailing average at 0.030%.Transfer volume has been extraordinarily low for all of 2012, which has already reduced the trailing daily average by 14%.
  • It was a busy month for earnings reports as equity investments generally had strong returns. Equity investors were disappointed by Apple’s earnings release but were reassured by earnings from both Boeing and Caterpillar, and ECB President Mario Draghi stated that he would do "whatever it takes" to preserve the euro. Nevertheless, DC participant monies moved towards fixed income during July both in terms of days as well as assets. Fifty-seven percent of days favored fixed income investments—similar to June. In total assets, $237 million transferred out of equities into fixed income investments. While the total amount is similar to that of June, only $112 million came from diversified equities (equities excluding company stock), compared to $253 million in June.
  • Company stock funds endured the bulk of equity outflows at $125 million (58%). Large U.S. asset classes had $76 million and small U.S. had $33 million in outflows as well. All other equity asset classes experienced much lesser gains or losses from transfers for the month.
  • All fixed income asset classes recorded net inflows in July. Bond funds received the most with $114 million (53%) of inflows, while GIC/stable value funds took $90 million (42%). Money market funds also received $28 million in net participant transfers.
  • Discretionary contributions (employee only contributions going into the plan) rebound a full percentage from last month to reach 62.3% in equities for July. This measure indicates a more favorable participant outlook toward equities looking forward compared to June.
  • Participant average equity exposure decreased slightly by 0.2% to 59.1% at the end of July, in large part due to the transfer outflows.

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

Index Returns

   July 2012 YTD
Dow Jones Industrial Average 1.15% 8.05%
Russell 2000 Index -1.38% 7.03%
Barclays Capital Aggregate Bond Index 1.38% 3.78%
S&P 500 1.39% 11.01%
MSCI EAFE Index 1.13% 4.13%
NASDAQ Index 0.20% 13.54%
MSCI Emerging Markets Index (Net) 1.95% 5.97%

Index Statistics

July 2012 YTD
Average Daily Net Activity 0.024% 0.024%
Number of Fixed Income Days 12 (57%) 81 (55%)
Number of Equity Days 9 (43%) 65 (45%)
Number of Above Normal Days 1 8


*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