Alight Solutions 401(k) Index™: 2017 Observations

2017 was the slowest trading year in the 20 year history of the Alight Solutions 401(k) Index^TM. In total, 1.45% of total plan balances were traded during the year, down from 2.13% in 2016. There were 13 days of above-normal¹ daily transfer activity in 2017—less than half the number in 2016 (28) and the trailing 5-year and 10-year averages (30 and 32 days, respectively).

Part of the light trading activity can be explained by the prevalence of target date² funds, the largest asset class in the 401(k) Index^TM. The percentage of assets invested in target date funds grew in 2017 from 24.1% at the beginning of the year to 27.2% by the end of the year. Much of this growth can be attributed to the fact that target date funds receive the lion’s share of new 401(k) contributions. In 2017, 43% of contributions were to target date funds.

Strong investment returns also likely contributed to the light trading activity. 2017 proved to be a generally positive year for investors. Large cap U.S. equities (represented by the S&P 500 Index) and international equities (represented by the MSCI All Country World ex-U.S.A. Index) provided strong returns with little volatility throughout the year. Bonds (represented by the Bloomberg Barclays Capital U.S. Aggregate Bond Index) and small cap U.S. equities (represented by the Russell 2000 Index) experienced periods of volatility but still provided positive returns over the last 12 months.

“During the 20-year history of the 401(k) Index^TM, trading activity typically spikes when there is a downturn in the market,“ said Rob Austin, head of research at Alight. “In general, 2017 saw the markets steadily rise, so rather than rebalancing, 401(k) investors stayed the course and enjoyed positive market returns."

Members of the media: please contact MacKenzie Lucas for questions about the Alight Solutions 401(k) Index™.

Learn more about the Alight Solutions 401(k) Index here.

1. 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 Alight Solutions 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.
2. Target date funds also include the amounts in target risk funds for companies who do not have target date funds. The amount in the target risk funds is less than 10% of the total.