After a year that saw the lowest trading in nearly a quarter century, the war in Ukraine and associated market volatility resulted in another busy month of trading for 401(k) investors. .
As international political events dragged Wall Street down, 401(k) investors responded with above-normal trading activity, according to Alight Solution February 401(k) Indexwhich tracks the 401(k) trading activity of over 2 million people with over $200 billion in collective assets.
There were six above-normal trading days in February and high activity continued into March, according to data shared by the company. At the end of February, there were 11 days above normal. There were only three trading days above normal in 2021. A “normal” level of relative transfer activity is when the net daily movement of participant balances as a percentage of total 401 (k ) within the index is equal to 0.3 times and 1.5 times the average daily net activity of the previous 12 months.
On average, 0.02% of 401(k) balances were traded daily in February, eclipsing January’s daily trading levels, which at the time were the highest levels in more than a year.
Net trading saw investors shift assets into fixed income securities rather than equities, with 14 out of 19 trading days favoring fixed income funds.
Entrances and exits
Trading inflows in February went mostly to stable-value, money market and bond funds, while outflows came mostly from target date funds, large US stocks and small US equity funds.
As in January, stable-value funds collected the highest percentage of trading entries for the month, at 76% for an index dollar value of $464 million, while 14% went to money market funds (or $87 million) and 7% went to bond funds (or $41 million), according to data from Alight.
The asset classes with the most outflows in February went to target date funds, at 41% for an index value of $251 million, followed by large US equity funds at 36% (or 220 million) and small US equity funds at 6% ($38). million).
After reflecting market movements and trading activity, the average asset allocation in equities fell from 70% in January to 69.5% in February. Meanwhile, new equity contributions fell from 70.1% in January to 69.5%.
The largest contributing asset classes in February included target date funds, at 45% for an index value of $730 million, followed by large US equity funds at 22% (or $355 million) and international equity funds at 7% (or $122 million).
In terms of market returns for common indices, US bonds (represented by represented by the Bloomberg US Aggregate Bond Index) were down -1.12% for the month of February; Large US stocks (as represented by the S&P 500 Index) were -2.99%; Small US stocks (represented by the Russell 2000 Index) were 1.07%; and international equities (as represented by the MSCI All Country World ex-US Index) were -1.98%. All of these indices have had negative returns since the beginning of the year at the end of February.