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401(k) Index &  Observations Monthly Details: February 2013 | Aon

401(k) Index & Observations Monthly Details: February 2013


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Market Commentary
  • After rising sharply in January, defined contribution plan participants’ daily transfer volumes resumed levels closer to normal in February, according to the Aon Hewitt 401(k) Index™. Transfers averaged 0.030% of total balances daily—above the trailing 12-month average of 0.025%. There were four days in February with transfer activity above normal*.
  • While not as robust as January, February proved to be a generally positive month for equity investors. U.S. and emerging market indices gained, while the MSCI EAFE Index finished down by approximately 1%. Uncertainty over Italy’s presidential election, England’s credit rating cut and cautious guidance from a few large multinational corporations gave equity investors cause for concern. However, a larger-than-expected drop in the U.S. trade deficit, optimistic readings on new home sales and prices, as well as consumer confidence were seen as positive news by many market participants. Comments from the Federal Reserve re-affirming its accommodative stance on monetary policy helped as well.
  • In February, total net transfer activity was moderate, totaling $431 million or 0.31% of total participant balances. This amount is far less than January’s total of $930 million, indicating that, on average, participants were much less active during February compared to January.
  • Net daily transfers favored fixed income funds for 63% of trading days this month, which is similar to the trend of 2012. Transfers into diversified equities (equity excluding company stock) asset classes totaled $104 million of total flows or 0.07% of total assets.
  • Total net outflows in February were heavily concentrated among two asset classes: company stock funds, losing $193 million (45%), and bond funds, which lost $171 million (40%) due to flows. Additionally, large U.S. equities funds lost $45 million (10%) and emerging market funds lost $22 million (5%). February ended with net inflows for most asset classes. The largest inflows went to GIC/stable value funds which gained $151 million (35%). Premixed funds received $75 million (17%) and international funds took in $70 million (16%) of monthly inflows while, money market gained $68 million (16%).
  • Employee discretionary contributions, another measure of participant sentiment, increased their equity allocations from the January average of 62.2% by 1.2%. This means 63.4% of new contributions were invested in equities during February.
  • By the end of February, participants’ overall equity allocation remained flat at 61.1%, up slightly from 61.0% at the end of January.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending February 28, 2013.

Index Returns

February 2013 YTD
Barclays Capital Aggregate Bond Index 0.50% -0.20%
S&P 500 1.36% 6.61%
Dow Jones Industrial Average 1.76% 7.77%
Russell 2000 Index 1.10% 7.43%
NASDAQ Index 0.75% 4.86%
MSCI EAFE Index -0.95% 4.28%
MSCI Emerging Markets Index (Net) -1.26% 0.10%

Index Statistics

February 2013 YTD
Average Daily Net Activity 0.030% 0.035%
Number of Fixed Income Days 12 (63%) 14 (35%)
Number of Equity Days 7 (37%) 26 (67%)
Number of Above Normal Days 4 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