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

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


Market Commentary
  • According to the Aon Hewitt 401(k) Index™, defined contribution plan participants’ daily transfer volumes remained flat in March. Slightly lower than February’s activity, transfers averaged 0.026% of total balances daily—just above the trailing 12-month average at 0.025%. March had three days with transfer activity above normal*.
  • Global equity investors experienced mixed results during March. The controversial Cypriot banking resolution and lingering concerns over economic growth and housing in China contributed to losses in both the MSCI EAFE Index and MSCI Emerging Markets Index. However, U.S. equity indices rose as nearly all banks passed the Federal Reserve’s stress test and home prices rose on a year-over-year basis in all 20 metropolitan statistical areas (MSAs) included in the S&P/Case-Shiller Index.
  • Developed market equity investors fared better than emerging market equity investors during the first quarter of 2013. Policy uncertainty, growing unemployment and shrinking real GDP caused Eurozone equities to lag and led emerging market equity investors to question the projection of global growth and take more defensive positions. On the other hand, the Japanese government’s continued commitment to re-inflate its economy through additional quantitative easing led to strong gains for Japanese equity investors. In the U.S., fourth quarter earnings releases were positive and policymakers averted the fiscal cliff—providing for the robust gains across U.S. equity markets.
  • Total net transfer activity in March was moderate, totaling $345 million or 0.24% of total participant balances. This amount is less than February’s total of $431 million, indicating that, on average, participants were slightly less active in March compared to February.
  • For the first quarter, total net transfer activity was among the highest quarters on record. In total, $1.19 billion moved into diversified equities, which is the largest quarterly dollar reported by the Aon Hewitt 401(k) Index™ (1997 inception). As a percent of total participant balances, the quarter totaled 0.88%—the highest since the current bull market began in the second quarter of 2009.
  • As a reversal from last month, net daily transfers favored fixed income funds for 35% of trading days this month compared to 63% in February. Transfers into diversified equities (equity excluding company stock) asset classes totaled $277 million of total flows or 0.20% of total assets, up significantly from 0.06%.
  • Similar to last month, March total net outflows were heavily concentrated among two asset classes: company stock funds, losing $175 million (51%), and bond funds, losing $155 million (45%). In addition, GIC/stable value and international funds lost $10 million (3%) and $4 million (1%), respectively.
  • Net inflows for most asset classes were reported this month. The largest inflows were in large U.S. equity funds which gained $128 million (37%), followed by premixed funds with $108 million (31%) and small U.S. equity with $62 million (18%).
  • Another measure of participant sentiment, employee discretionary contributions, shows participants increased their equity allocations to 64.0% in March, up from 63.4% in February.
  • Fueled by the rising market, participants’ overall equity allocation reached 61.8%, compared to 61.1% at the end of February. This is the highest equity allocation recorded by the Aon Hewitt 401(k) Index™ in nearly two years.

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

Index Returns

March 2013 YTD
Barclays Capital Aggregate Bond Index 0.08% -0.12%
S&P 500 3.75% 10.61%
Dow Jones Industrial Average 3.86% 11.92%
Russell 2000 Index 4.62% 12.39%
NASDAQ Index 3.49% 8.51%
MSCI EAFE Index 0.82% 5.13%
MSCI Emerging Markets Index (Net) -1.73% -1.62%

Index Statistics

March 2013 YTD
Average Daily Net Activity 0.026% 0.032%
Number of Fixed Income Days 7 (35%) 21 (35%)
Number of Equity Days 12 (65%) 39 (65%)
Number of Above Normal Days 3 16

*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