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

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


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Market Commentary

  • Despite equity markets getting off to a rough start in 2014, defined contribution plan participants continued to favor stock funds in January, according to the Aon Hewitt’s 401(k) Index™. Out of the total net transfer activity of $306 million (0.19%) in January, $212 million (0.13%) flowed into diversified equities (equity assets excluding company stock). In addition, employee discretionary contributions to equities, another measure of participant sentiment, increased to 65.6% in January, up from 64.1% in December.
  • Overall, equity markets were down in January, with emerging markets being the weakest link. The MSCI Emerging Markets Index returned -6.5% for the month of January. U.S. equities also declined, as the S&P 500 Index dropped 3.5% during the month. Non-U.S. equities declined, with the MSCI All Country World ex-U.S. Index posting a January return of -4.5%.
  • In spite of these poor returns, investors continued to transfer money into equities. International funds had the most net inflows with gains of $83 million (27%). Large U.S. equity funds followed with a gain of $59 million (19%) and Mid U.S. equity funds also had $42 million (14%) of the monthly inflows.
  • The fixed income market, as measured by the Barclays Capital Aggregate Bond Index, rallied to start the year, gaining 1.5%, as the yield on the 10-year Treasury fell by 39 basis points. Bond funds saw moderate inflows of $56 million (18%).
  • Net outflow activity in January was led by company stock funds with $179 million (58%), GIC/stable value funds with $78 million (26%), and money market funds with $28 million (9%) transferring out.
  • Overall, defined contribution plan participants daily transfer volume averaged 0.025% of total daily balances, the same as in December. This is slightly below the 12-month daily average of 0.028%. Three days in January had transfer activity above normal* levels.
  • On average, participants’ overall equity allocation slightly decreased to 64.7% at the end of January, down from 65.2% in December.

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending January 31, 2014.

Index Returns

January 2014 YTD
Barclays Capital Aggregate Bond Index 1.5% 1.5%
S&P 500 -3.5% -3.5%
Russell 2000 Index -2.8% -2.8%
MSCI All Country World ex-U.S. Index (net) -4.5% -4.5%

Index Statistics

January 2014 YTD
Average Daily Net Activity 0.025% 0.025%
Number of Fixed Income Days 7 (33%) 7 (33%)
Number of Equity Days 14 (67%) 14 (67%)
Number of Above Normal Days 3 3

*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