401(k) investors were very active traders in the first quarter of 2020, particularly when Wall Street was reeling as the world was coming to grips with the COVID-19 pandemic. There were 29 days of above-normal1 trading activity, the highest for a quarter since the Alight Solutions 401(k) Index™ started in 1997. Trading activity almost universally saw investors moving money from equity funds to fixed income with 98% of net trading inflows for the quarter going to stable value, money market and bond funds.
First quarter observations:
- Net transfers for the quarter were 1.59% of balances — a level that is more than three times the average quarterly net trading activity for the past five years (0.50%) and the highest for a quarter since the third quarter of 2008
- 43 out of 62 trading days in the first quarter had net trading dollars moving from equities to fixed income
Alight Solutions 401(k) Index™ statistics for Q1 2020 and year-to-date:
| Index Statistics | Q1 2020 | 2020 YTD |
|---|---|---|
| Net transfers as percentage of starting balance | 1.59% | 1.59% |
| # Fixed days | 43 (69%) | 43 (69%) |
| # Equity days | 19 (31%) | 19 (31%) |
| # Above-normal days | 29 | 29 |
Asset classes with most trading inflows in Q1 2020
| Percentage of inflows | Index dollar value ($ mil) | |
|---|---|---|
| Stable value funds | 49% | $1,736 |
| Bond funds | 31% | $1,095 |
| Money market funds | 18% | $631 |
Asset classes with most trading outflows in Q1 2020
| Percentage of inflows | Index dollar value ($ mil) | |
|---|---|---|
| Target date2 funds | 37% | $1,326 |
| Large U.S. equity funds | 37% | $1,324 |
| Mid U.S. equity funds | 8% | $294 |
First quarter market observations:
Equity markets entered into bear market territory during the first quarter of 2020. Small U.S. equities (represented by the Russell 2000 Index) fell -30.6%, international equities (represented by the MSCI All Country World ex-U.S. Index) dropped -19.6%, and large U.S. equities (represented by the S&P 500) lost -19.6%. U.S. bonds (represented by the Bloomberg Barclays Aggregate Index) gained 3.2% for the quarter.
| Returns for common indices | Q1 2020 | 2020 YTD |
|---|---|---|
| Bloomberg Barclays U.S. Aggregate Index | 3.2% | 3.2% |
| S&P 500 Index | -19.6% | -19.6% |
| Russell 2000 Index | -30.6% | -30.6% |
| MSCI All Country World ex-U.S. Index (net) | -23.4% | -23.4% |
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.
- 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
- 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.
