September 401(k) Trading at lowest point since March 2020

Alight Solutions released September updates to its 401(k) index, noting that with stocks posting their worst month since March 2020, “markets have seen a flight to safety among 401(k) plan investors. )”.

All but two trading days during the month saw net trading activity shift money from equities to fixed income, Alight says. Stable value funds accounted for 80% of net inflows and money market funds received another 15%. Half of the net outflows came from funds at maturity.

On average, 0.012% of 401(k) balances were traded daily, compared to an average of 0.009% last month. Investors preferred to shift assets into fixed income funds for 19 of the 21 trading days. Trading inflows went mostly to stable-value, money market and bond funds, while outflows came mostly from target-date funds, large US stocks and mid-size US equity funds, Alight said.

After reflecting market movements and trading activity, the average equity asset allocation declined from 68.3% in August to 67.2% in September. Additionally, new contributions to equities declined from 68.5% in August to 68% in September.

In its observations for the third quarter, Alight notes that the see-saw stock prices had 401(k) plan investors trading starts and stops. While Wall Street posted gains at the start of the quarter, trading was light and saw silver move into equities. However, as stocks fell in the second half, trading activity increased and money flowed into fixed income securities.

There were five trading days above normal in the quarter, compared to 17 days above normal in the second quarter. Net transfers for the quarter represented 0.24% of balances. Data from Alight shows that 42 of the 64 trading days in the first quarter saw net trading dollars shift from equities to fixed income.

According to the index, a “normal” level of relative transfer activity is when the net daily movement of participant balances, as a percentage of total 401(k) balances within the index, is between 0, 3 times and 1.5 times the average daily net. activity for the last 12 months. A day of “high” relative transfer activity corresponds to a day where the net daily movement exceeds twice the average daily net activity. A day of “moderate” relative transfer activity is when the net daily movement is between 1.5 and twice the average daily net activity of the previous 12 months.