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Alight Solutions 401(k) Index™: Full Year 2020 observations

In 2020, 401(k) investors were busy traders out of equities as stocks were falling and slowly returned to them after their rebound.


In 2020, 401(k) investors were busy traders out of equities as stocks were falling and slowly returned to them after their rebound.  Net transfers for the year as a percent of balance was 3.51%, the highest level since 2008. The year had 47 days of days of above-normal1 activity, with 26 of these days occurring during a six week stretch from the end of February to early April when the world was coming to grips with the COVID-19 pandemic.


“In some ways, there was a full market cycle in 2020.  There was a steep drop in March followed by a sustained recovery throughout the remaining months of the year.  Unfortunately, we saw many investors repeat the unfortunate trend of selling low and buying high that has been shown repeatedly throughout the more than 20-year history of the Alight Solutions 401(k) IndexTM.  The busiest days for trading were when the stocks were tumbling, and the trades overwhelmingly went from equities to fixed income.  It wasn’t until the end of the year—when the market was setting new record highs—that investors traded back into equities.” – Rob Austin, head of research at Alight Solutions.

Asset classes with most trading inflows in 2020

  Percentage of inflows Index dollar value ($ mil)
Bond funds 44% $3,509
Stable value funds 39% $3,052
Money market funds 13% $1,030


 

Asset classes with most trading outflows in 2020

  Percentage of outflows Index dollar value ($ mil)
Large U.S. equity funds 38% $2,987
Target date2 funds  27% $2,142
Company stock 10% $782


 

Asset classes with most contributions in 2020

  Percentage of contributions Index dollar value ($ mil)
Target date2 funds 46% $7,071
Large U.S. equity funds 20% $3,125
International funds 7% $1,072


 

Percentage of balances by asset class

Asset class Year end 2020 Year end 2019 Change
Money market 1.1% 1.0% 0.1%
Stable value 9.1% 9.5% -0.4%
Bond 8.3% 7.9% 0.4%
Balanced 1.6% 2.0% -0.4%
Target date funds 29.6% 29.3% 0.3%
Large cap U.S. equity 25.0% 26.0% -1.0%
Mid cap U.S. equity 5.3% 4.8% 0.5%
Small cap U.S. equity 3.0% 2.9% 0.1%
International 6.3% 6.5% -0.2%
Emerging markets 1.4% 1.3% 0.1%
Specialty/sector 0.3% 0.4% -0.1%
Company stock 6.2% 6.3% -0.1%
Self-directed brokerage 2.7% 2.1% 0.6%

 

Asset type Year end 2020 Year end 2019 Change
Equity 67.7% 68.1% -0.4%
Fixed income 32.3% 31.9% 0.4%

 

After reflecting contributions, trades, and market activity, 401(k) investors ended 2020 with 67.7% in equities, down slightly from 68.1% at the beginning of the year.  

Index statistics 2020
Total transfers as percentage of starting balance 3.51%
# Fixed days 184 (73%)
# Equity days 69 (27%)
# Above normal days 47

 

The following table shows the returns of major market indices for the year ending December 31, 2020:

Returns for common indices 2020
Bloomberg Barclays U.S. Aggregate Index 7.5%
S&P 500 Index 18.4%
Russell 2000 Index 20.0%
MSCI All Country World ex-U.S. Index (net) 10.7%

 

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


  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.

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