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401k Index: October 2012 | Aon

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


Market Commentary

  • Average daily transfer volume among defined contribution plan participants was extremely low during the month of October, according to the results of the Aon Hewitt 401(k) Index™. A meager 0.017% of total balances transferred daily while the trailing 12-month daily average, which continued to decline, sits at 0.024%. No days in October had transfer activity above normal* while three days were actually more than 70% below normal daily levels.
  • Total net transfer activity in October amounted to $192 million or 0.14% of total participant balances. While not the lowest level recorded this year, this month’s measurement of volume is still very low by comparison.
  • In the broad capital markets, overall investor anxiety increased during the month as a number of multi-national companies released disappointing earnings reports, and the International Monetary Fund lowered its expectations for global economic growth. In addition, uncertainty over the outcome of the U.S. presidential election and looming fiscal cliff weighed on investors as most major equity indices fell for the month.
  • Within the Aon Hewitt 401(k) Index, net daily transfers favored fixed income funds for nearly three-quarters (71%) of the days in October, representing $123 million in total flows or 0.09% of total assets. When company stock activity is excluded, however, equity outflows account for just $16 million (0.01%) of participant balances.
  • Most of the outflows for October were from equities: Company stock funds lost the most in the amount of $106 million (55%), while small U.S. equities accounted for $43 million (22%), and emerging markets had $17 million (9%) of the outflows. Midcap U.S. funds also lost $13 million (7%).
  • For net inflows in October, bond funds had the largest gains which totaled $66 million (34%) of flows. Among other fixed income asset classes money market funds took in $26 million (14%). Lifestyle/pre-mixed funds had $45 million (23%) of inflows while the international asset class, which was the only class exclusively based in equities to see significant gains, received $37 million (19%).
  • Another measure of participant sentiment is discretionary contributions (employee-only contributions). On average, 62.0% of employee discretionary contributions were directed to equities for October, which is down slightly from September (62.1%).
  • Participants’ overall equity allocation decreased half a percentage to reach 59.5% by the end of October. The decline in stock values was the largest factor in this decrease.

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

Index Returns

October 2012 YTD
Dow Jones Industrial Average -2.38% 9.51%
Russell 2000 Index -2.17% 11.75%
Barclays Capital Aggregate Bond Index 0.20% 4.20%
S&P 500 -1.85% 14.29%
MSCI EAFE Index -0.61% 11.00%
NASDAQ Index -4.39% 15.42%
MSCI Emerging Markets Index (Net) 0.83% 11.31%

Index Statistics

October 2012 YTD
Average Daily Net Activity 0.017% 0.023%
Number of Fixed Income Days 15 (71%) 127 (61%)
Number of Equity Days 6 (29%) 82 (39%)
Number of Above Normal Days 0 13

*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