Human Resources

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

Market Commentary

  • For defined contribution plan participants, October was a heavy trading month according to Aon Hewitt’s 401(k) Index™ with seven days of “moderate” or “high” trading activity—the most days of above-normal trading in a month since May 2013. Overall, nearly $400 million of 401(k) balances transferred in the month, representing roughly 0.25% of total assets—both record highs for the year.
  • All but one of the above-normal days had participants favoring fixed income funds over equities. Fixed income assets were favored over equities on 57% of the trading days in October. Transfers away from diversified equities (equity assets excluding company stock) totaled $228 million.
  • Fixed income funds also saw the most inflows in October. Bond funds gained $176 million (44% of all asset trades), GIC/stable value funds received $119 million (30%) while money market took in $65 million (16%). Company stock funds led the net outflow activity with $110 million (27%), followed by small U.S. equity and mid U.S. equity with $102 million (26%) and $85 million (21%), respectively. Lifestyle/premixed funds lost $78 million (20%).
  • After incorporating trading and market activity, participants’ overall allocation to equities increased marginally to 65.7% from 65.5% last month. Future contributions to equities decreased to 66.4% from 67.0%.
  • While October was a volatile month for the markets, most indices trended upward. U.S. large-cap equities, as measured by the S&P 500 Index, returned 2.4% during the month of October. Small-cap equities outperformed their large-cap counterparts as the Russell 2000 gained 6.6%. The Barclays U.S. Aggregate Index, a measure of the fixed income market, posted a return of 1.0% and the MSCI All Country World ex-U.S. Index, a benchmark used to represent companies based in the developed markets outside of the U.S., had its second consecutive month of negative performance with a return of -1.0%.

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

Index Statistics

October 2014 YTD
Average Daily Net Activity 0.030% 0.023%
Number of Fixed Income Days 13 (57%) 110 (53%)
Number of Equity Days 10 (43%) 97 (47%)
Number of Above Normal Days 7 19

Indices Returns

October 2014 YTD
Barclays Capital Aggregate Bond Index 1.0% 5.1%
S&P 500 2.4% 11.0%
Russell 2000 Index 6.6% 1.9%
MSCI All Country World ex-U.S. Index (net) -1.0% -1.0%

*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.