Human Resources

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

Market Commentary

  • Average daily transfer volume among defined contribution plan participants during November was at the highest level this year, according to the results of the Aon Hewitt 401(k) Index™. On average, 0.030% of total balances transferred daily, whereas the 12-month daily average is 0.024%. Six days in November had transfer activity above normal* with four of these days showing activity more than twice the normal level.
  • The month of November brought volatility for participants. Equity markets dropped during the first two weeks as concerns grew over the fiscal cliff and a slowing U.S. economy. However, markets recovered during the last two weeks of the month as third quarter GDP was revised higher, the housing market performed better than expected, and early indicators forecasted a strong holiday shopping season. Most major equity and fixed income indices finished in positive territory by month-end.
  • Total net transfer activity in November amounted to $537 million or 0.40% of total participant balances. This is the highest level recorded by the Index since August 2011.
  • Within the Aon Hewitt 401(k) Index™, net daily transfers favored fixed income funds for 90% of trading days in November. Transfers into fixed income asset classes from equities totaled $481 million of total flows or 0.36% of total assets. When company stock activity is excluded, equity outflows total $326 million (0.24%) of participant balances. Both monthly totals are the highest on record this year.
  • Net outflows for November came mostly from four equity asset classes consisting of U.S. investments: Large U.S. funds lost the largest amount of $171 million (32%), followed by company stock fund losses at $155 million (29%), small U.S. equities at $88 million (16%), and mid U.S. funds with $53 million (10%) of the outflows. Premixed funds also had $47 million (9%) transfer out.
  • Among the asset classes with net inflows for November, bond funds had substantial gains totaling $239 million (45%) of flows. After bonds, GIC/stable value funds also recorded sizable gains with $206 million (38%) transferring in. Additionally, money market funds had $55 million (10%) of the monthly inflows, while international funds claimed $30 million (6%) despite transfers otherwise moving out of equities.
  • Another measure of participant sentiment is discretionary contributions (employee-only contributions). On average, 62.3% of employee discretionary contributions were directed to equities for November, which is up slightly from October (62.0%).
  • Participants’ overall equity allocation decreased 0.3% to reach 59.2% by the end of November. As most market indices ended the month positive, this is largely attributable to net transfer activity away from equities.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending November 30, 2012.

Index Returns

November 2012 YTD
Dow Jones Industrial Average -0.54% 8.92%
Russell 2000 Index 0.53% 12.35%
Barclays Capital Aggregate Bond Index 0.16% 4.36%
S&P 500 0.58% 14.96%
MSCI EAFE Index 2.42% 13.68%
NASDAQ Index 1.11% 16.70%
MSCI Emerging Markets Index (Net) 1.27% 12.72%

Index Statistics

November 2012 YTD
Average Daily Net Activity 0.030% 0.024%
Number of Fixed Income Days 19 (90%) 146 (63%)
Number of Equity Days 2 (10%) 84 (37%)
Number of Above Normal Days 6 19

*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