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401(k) Index &  Observations Monthly Details: March 2014 | Aon

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


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Market Commentary

  • March was a light trading month for investors in their defined contribution plan according to Aon Hewitt’s 401(k) Index™. Overall, the daily transfer volume in March averaged 0.021% of the total daily balances, slightly lower than February’s value of 0.023%. In addition, there were zero days in March with above normal* transfer activity levels, marking the first month of zero above normal trading days since August 2013. Total transfer activity across the Index was low, at $244 million (0.15%).
  • When trading occurred, defined contribution plan participants favored fixed income funds for 57% of trading days in March. Overall, net transfer activity moved away from diversified equities (equity assets excluding company stock) by $160 million (0.10%).
  • The asset classes that experienced net inflows during March include premixed portfolio funds with gains of $70 million (29%) and bond funds with a gain of $36 million (15%). Next in line were international funds with $29 million (12%) of the monthly inflows and small cap U.S. equity funds received $23 million (10%). Company stock funds again lead the net outflow activity with $208 million (86%) transferring out followed by GIC/stable value funds with $13 million (6%) and money market funds with $12 million (5%) transferring out.
  • On average, participants’ overall equity allocation remained at 65.5% at the end of March, unchanged from the value in February. Employee discretionary contributions to equities, another measure of participant sentiment, were also flat at 66.6% in March, compared to 66.5% in February.
  • Regarding returns, emerging equity markets outperformed the developed equity markets during March. The MSCI Emerging Markets Index posted strong performance for the second consecutive month, returning 3.1% during March on top of its 3.3% gain in February. U.S. and non-U.S. equities also had positive performance as the S&P 500 Index returned 0.8% and the MSCI All Country World ex-U.S. Index gained 0.3%. The fixed income markets, as measured by the Barclays U.S. Aggregate Index, declined by 0.2% during month.
  • For the first quarter, $393 million total net transfer activity moved into diversified equities. As a percentage of total participant balances, the quarter totaled 0.25%.
  • During the first quarter, the S&P 500 hit a series of record closing highs and posted a return of 1.8%. Non-U.S. equities, as measured by the MSCI All Country World ex-U.S. Index, also delivered positive performance over the first three months of the year, gaining 0.5%. Two consecutive months of positive performance for the MSCI Emerging Markets Index were not enough offset the rough start it had in January as the Index had an overall return of -0.4% during the quarter. The Barclays Capital Aggregate Bond Index returned 1.8% during the quarter, as the yield on the 10-year Treasury fell by more than 25 basis points.

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

Index Returns

March Q1 2014 YTD
Barclays Capital Aggregate Bond Index -0.2% 1.8% 1.8%
S&P 500 0.8% 1.8% 1.8%%
Russell 2000 Index -0.7% 1.1% 1.1%
MSCI All Country World ex-U.S. Index (net) 0.3% 0.5% 0.5%

Index Statistics

March Q1 2014 YTD
Average Daily Net Activity 0.021% 0.023% 0.023%
Number of Fixed Income Days 12 (57%) 29 (48%) 29 (48%)
Number of Equity Days 9 (43%) 32 (52%) 32 (52%)
Number of Above Normal Days 0 5 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 average daily net activity of the preceding 12 months.

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