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401(k) Index & Observations Monthly Details: February 2014

401(k) Index & Observations Monthly Details: February 2014


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Market Commentary

  • According to Aon Hewitt’s 401(k) Index™ defined contribution plan participants favored fixed income in February—a reversal of trends from the past four month—as 10 of the 19 trading days saw fixed income receive transfer inflows. Overall, net transfer activity for February moved slightly away from diversified equities (equity assets excluding company stock) by $21 million (0.01%). Total transfer activity across the Index was low, at $264 million (0.17%). On the other hand, employee discretionary contributions to equities, another measure of participant sentiment, increased to 66.5% in February, up from 65.6% in January.
  • Overall, defined contribution plan participants daily transfer volume averaged 0.023% of total daily balances, slightly lower than last month (0.025%). This is below the 12-month daily average of 0.027%. In February, two days had transfer activity above normal* levels.
  • On average, participants’ overall equity allocation increased to 65.5% at the end of February, up from 64.7% in January.
  • February was a strong month for the global equity markets, as they rebounded from their poor showing in January. U.S. equities, as measured by the S&P 500, gained 4.6%, and non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, gained 5.1% during the month. Emerging markets also increased during February as the MSCI Emerging Markets Index returned 3.3%. The fixed income market posted a positive return, with the Barclays Capital Aggregate Bond Index gaining 0.5%.
  • Fixed income asset classes experienced net inflows during February. Bond funds had the largest inflows with gains of $79 million (30%) and GIC/stable value funds followed with a gain of $51 million (20%). In addition, specialty/sector funds had $35 million (13%) of the monthly inflows, while international funds and self-directed window funds both received around $29 million (11%).
  • Net outflow activity was led by company stock funds with $191 million (73%), large U.S. equity funds with $37 million (14%), and small U.S. equity funds with $28 million (11%) transferring out.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending February 28, 2014.

Index Returns

February 2014 YTD
Barclays Capital Aggregate Bond Index 0.5% 2.0%
S&P 500 4.6% 1.0%
Russell 2000 Index 4.7% 1.8%
MSCI EAFE Index 5.0% 0.3%

Index Statistics

February 2014 YTD
Average Daily Net Activity 0.023% 0.024%
Number of Fixed Income Days 10 (53%) 17 (43%)
Number of Equity Days 9 (47%) 23 (57%)
Number of Above Normal Days 2 5

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 daily net activity of the preceding 12 months.

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