401(k) trading activity surged at the end of February amid the sharp market sell-off caused by concerns over COVID-19 (often referred to as the coronavirus). The last week of the month was among the busiest 5-day stretches in the more than 20-year history of the Alight Solutions 401(k) Index™—surpassed by only a few weeks in 2008 and the week immediately following the market’s re-opening after the September 11, 2001 attacks. Even though almost all trades in February were from equity funds to fixed income ones, investors increased the equity allocation of their new contributions indicating that they remained bullish on the market in general.
February observations:
- On average, 0.046% of 401(k) balances were traded daily—the highest level since August 2011
- The net trading activity on February 28 was 15.8 times the average daily level, which surpassed the previous high of 11.8 times average (set in February 2018)
- The last week of February had more net trading activity than the combined activity throughout the fourth quarter of 2019
- 16 of 19 days favored fixed income funds
Alight Solutions 401(k) Index statistics for February 2020:
| Index statistics | February | 2020 YTD |
|---|---|---|
| Total transfers as percentage of starting balance | 0.67% | 0.71% |
| # Fixed days | 16 (84%) | 28 (70%) |
| # Equity days | 3 (16%) | 12 (30%) |
| # Above-normal1 days | 6 | 11 |
Inflows and outflows during February:
- Trading inflows mainly went to bond, stable value and money market funds
- Outflows were primarily from large cap U.S. equity, target date2 and mid cap U.S. equity funds
Asset classes with most trading inflows in February
| Percentage of inflows | Index dollar value ($ mil) | |
|---|---|---|
| Bond funds | 47% | $687 |
| Stable value funds | 41% | $597 |
| Money market funds | 11% | $160 |
Asset classes with most trading outflows in February
| Percentage of outflows | Index dollar value ($ mil) | |
|---|---|---|
| Large U.S. equity funds | 43% | $634 |
| Target date funds | 27% | $397 |
| Mid U.S. equity funds | 10% | $144 |
February investment portfolios:
- After reflecting market movements and trading activity, average asset allocation in equities decreased from 67.7% in January to 66.0% in February
- New contributions to equities increased from 68.0% in January to 68.2% in February
Asset classes with largest percentage of total balance at end of February
| Percentage of balance | Index dollar value ($ mil) | |
|---|---|---|
| Target date funds | 30% | $62,052 |
| Large U.S. equity funds | 25% | $52,507 |
| Stable value funds | 10% | $21,359 |
Asset classes with most contributions in February
| Percentage of contribution | Index dollar value ($ mil) | |
|---|---|---|
| Target date funds | 45% | $801 |
| Large U.S. equity funds | 20% | $354 |
| Company stock funds | 7% | $117 |
February market observations:
Equity indices struggled in February with international equities (represented by the MSCI All Country World ex-U.S. Index) losing -7.9%, large U.S. equities (represented by the S&P 500 Index) dropping -8.2% and small U.S. equities (represented by the Russell 2000 Index) falling -8.4%. However, U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) stayed positive, gaining 1.8%.
Returns for common indices
| February | 2020 YTD | |
|---|---|---|
| Bloomberg Barclays U.S. Aggregate Index | 1.8% | 3.8% |
| S&P 500 Index | -8.2% | -8.3% |
| Russell 2000 Index | -8.4% | -11.4% |
| MSCI All Country World ex-U.S. Index (net) | -7.9% | -10.4% |
Members of the media: please contact Landis Cullen for questions about the Alight Solutions 401(k) Index™. Learn more about the Alight Solutions 401(k) Index™ here.
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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.
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Target date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.
