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

Aon Hewitt 401(k) Index™ Observations
Monthly Details: January 2013


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Market Commentary
  • According to Aon Hewitt 401(k) Index™, defined contribution plan participants’ daily transfer volume in January was far above recent trends. Transfers averaged 0.040% of total balances daily—significantly higher than the trailing 12-month average of 0.025%. January’s count of nine days with transfer activity above normal* is the most we have seen since October 2008, when there were ten days with above-normal transfer activity.
  • In January, total net transfer activity was high, totaling $930 million or 0.69% of total participant balances. This is more than double December’s total of $426 million. This movement shows participants took more action in January than they have in the past 17 months since July 2011 when net transfer activity totaled $1.07 billion or 0.81% of participant balances.
  • January was an important month for equity investors since Congress approved a partial resolution to the fiscal cliff, and earnings releases from large multinationals like General Electric, JP Morgan and IBM generally beat analyst expectations—delivering a strong boost to investor confidence. Improvements in jobless claims in the U.S. and better than expected economic data from Europe also added to the positive investor sentiment. The Dow Jones Industrial Average closed the month at 13,861, nearing its all-time high (14,165 achieved on October 9, 2007).
  • The Aon Hewitt 401(k) Index™ reported optimistic trading movement among defined contribution plan participants in January. Net daily transfers favored equity funds for 90% of trading days in January, which is a reversal of the past 10 months favoring fixed income funds. Transfers into diversified equity (equity excluding company stock) asset classes totaled $811 million of total flows or 0.60% of total assets.
  • Most fixed income based asset classes had net outflows in January. Leading the way, GIC/stable value funds lost $365 million (39%). In addition, bond funds lost $301 million (32%), followed by money market funds losing $81 million (9%). The only asset class of equities with a net loss was company stock funds, with $184 million (20%) of outflows.
  • For net inflows in January, all diversified equity-based asset classes had gains. Premixed funds gained the most with $260 million (28%) transferring in. Large U.S. equities received $229 million (25%) and international funds took in $163 million (18%) of monthly inflows. Also, small U.S. equity gained $127 million (14%).
  • Employee discretionary contributions, another measure of participant sentiments, increased to 62.2% in equities for January. This is up from the December average at 61.7%.
  • Participants’ overall equity allocation increased 1.6% to reach 61.0% by the end of January, up from 59.4% at the end of December.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending January 31, 2013.

Index Returns

January 2013 YTD
Barclays Capital Aggregate Bond Index -0.70% -0.70%
S&P 500 5.18% 5.18%
Dow Jones Industrial Average 5.91% 5.91%
Russell 2000 Index 6.26% 6.26%
NASDAQ Index 4.08% 4.08%
MSCI EAFE Index 5.27% 5.27%
MSCI Emerging Markets Index (Net) 1.38% 1.38%

Index Statistics

January 2013 YTD
Average Daily Net Activity 0.040% 0.040%
Number of Fixed Income Days 2 (10%) 2 (10%)
Number of Equity Days 19 (90%) 19 (90%)
Number of Above Normal Days 9 9

*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