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

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


Market Commentary

  • Daily transfer volumes among defined contribution participants averaged 0.026% of balance totals per trading day during September, according to the Aon Hewitt 401(k) Index™. The monthly average was just below the trailing 12-month daily average, at 0.028%, and there were three days with transfer activity reaching above-normal* levels, up from zero days during August. The third quarter finished with low daily volumes, averaging just 0.023%.
  • The September statement by the Federal Reserve had a positive impact on the equity and bond markets during the third quarter. After alarming investors with tapering comments in May and June, the Federal Reserve announced on September 18 that it would delay plans to start tapering its monthly bond-buying program for the time being. The S&P 500 returned 5.2% during the period and non-U.S. equity indices also posted strong results, as the MSCI EAFE and MSCI Emerging Markets benchmarks returned 11.6% and 5.8%, respectively. While the fixed income markets experienced rising yields for most of the third quarter, the Federal Reserve’s September announcement provided a boost, as prices rallied and yields declined, helping to bring the fixed income markets, as measured by the Barclays Aggregate Bond Index, into positive territory for the third quarter.
  • Daily trading heavily favored fixed income investment vehicles during September, which experienced net gains from transfer activity for 17 of the 20 trading days (85%). During the third quarter fixed income was favored for 63% of days, while year-to-date daily trading was equally divided—exactly half of the days favored fixed income, and the other half favored equities.
  • Net transfer activity for September moved away from diversified equities (equity assets excluding company stock) by $160 million (0.11%). Total transfer activity across the Index was $489 million for the month. For the third quarter, diversified equities still managed positive flows, receiving $106 million (0.07%) of net transfers
  • Outflow activity was led by company stock funds, with $201 million (41%) transferring out. Large U.S. and premixed funds also decreased significantly, by $84 million (17%) and $81 million (17%) respectively. Bond funds were also down by $62 million (13%) due to flows.
  • Net inflows for September were led by GIC/stable value funds, which received $357 million (73%) of the flows. Money market funds received $99 million (20%), and international funds received $30 million (6%).
  • At the third quarter close, bond funds had lost the most, $469 million (37%), due to outflows, while GIC/stable value funds had received $705 million (56%) of the inflows.
  • Employee discretionary contributions, another measure of participant sentiment, increased to 64.9% in equities for September, up from 64.3% in August.
  • By the end of September, participants’ overall equity allocations averaged 63.3%, up from 62.8%. The increase was due primarily to market movement.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending September 30, 2013.

Index Returns

September Q3 2013 YTD
Barclays Capital Aggregate Bond Index 0.95% 0.57% -1.89%
S&P 500 3.14% 5.24% 19.79%
Dow Jones Industrial Average 2.27% 2.12% 17.64%
Russell 2000 Index 6.38% 10.21% 27.69%
NASDAQ Index 5.14% 11.20% 26.13%
MSCI EAFE Index 7.39% 11.56% 16.14%
MSCI Emerging Markets Index (Net) 6.50% 5.77% -4.35%

Index Statistics

September Q3 2013 YTD
Average Daily Net Activity 0.026% 0.023% 0.029%
Number of Fixed Income Days 17 (85%) 40 (63%) 94 (50%)
Number of Equity Days 3 (15%) 24 (37%) 94 (50%)
Number of Above Normal Days 3 4 37

*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