Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
November 10, 1997 12:00 AM

401(K) INVESTORS HELD FAST: MANY WERE HUNGRY FOR NEWS, BUT DIDN'T TRADE MUCH

Fred Williams
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Whether a testament to successful investment education or a general expression of helplessness and uncertainty, only a small percentage of 401(k) plan participants moved money around during the recent stock market gyrations.

    And most of those who did rejigger their asset allocation increased their stock holdings within two to three days after the market tanked, defined contribution service providers say.

    Most of those who transferred out of equities did so on Oct. 27 and Oct. 28, following the largest ever single-day point drop in the Dow Jones industrial average. They generally shifted to money market funds and other fixed income.

    But the trend was quickly reversed a day later, as participants moved back into equities in a big way. By the end of the week, it was business as usual.

    Among those interviewed, Hewitt Associates, Lincolnshire, Ill., had the most specific information on participant activity. Hewitt studied its 40 largest 401(k) alliance clients - representing $50 billion in assets and 1.4 million participants - all with daily valuation.

    According to Hewitt, fewer than 2% of 401(k) participants transferred assets on Oct. 27, Oct. 28 or Oct. 29.

    Phone volume skyrockets

    On Oct. 27, the day the Dow fell 553 points, $92 million was transferred by 10,000 participants. On Oct. 28, $102 million was transferred by 1,500 participants; the Dow shot back up 337 points that day. By the next day, only $81 million was transferred by just 3,281 participants.

    Calls to voice-response and service centers tripled or quadrupled during the three-day period because participants needed "hand holding. "

    Hewitt reported the volume of participant calls rose 33% from what was expected on Oct. 27, and 60% on Oct. 28. Call volume dropped off by 50% on Oct. 29, according to Hewitt.

    At most service providers, callers were seeking information and market news, and weren't conducting transactions.

    Robert L. Reynolds, president of Fidelity Investments Institutional Retirement Group, Boston, described Fidelity's experience in late October as similar to other large 401(k) vendors. He said Fidelity experienced a surge in phone activity, mainly with investors asking questions and seeking information, but not seeking to bail out or make major asset allocation changes.

    Fidelity's 401(k) participants moved about $100 million out of equities and into money market and stable value funds Oct. 27, then moved $500 million into equity funds the following day.

    "It shows that with the proper information and having access to information, they (plan participants) generally stayed the course," said Mr. Reynolds.

    Edmund Martinez, vice president and senior investment manager at Merrill Lynch Group Employee Services, Plainsboro, N.J., with $70 billion in 401(k) assets under management, said phone calls to its participant services area were six times the normal daily average. The net result: "Participants were buying into equities . . . and at the end of the week it was a non-event."

    Jim Pope is chief executive officer of Northern Trust Investment Consulting, Atlanta, a major 401(k) record keeping firm. He said there's probably a lesson in 401(k) plan participants' behavior during late October, when they bought after the dip:

    "We have probably unrealistically built in the expectation now that when the market drops it will always come back. The average participant has seen the market grow substantially .*.*. and if there is a dip, it always comes back. That could cause problems down the road."

    Michael Dickerman, principal at Towers Perrin, Philadelphia, and director of the Towers Perrin Professional Development Institute, agreed.

    "The current generation of 401(k) investors has been taught by the prior generation; 1997 investors were taught by 1987. They realize that in the 1987 market crash those who pulled out took some losses and those who stayed in the market were rewarded and have enjoyed tremendous growth since then," he said.

    Plan sponsors, meanwhile, say participants had lots of questions and interest in the market activities during the last week of October, but there was no sense of panic or wholesale exit from the equity markets. Much of that interest was in picking up bargains in the equity market.

    Don Butt, manager of investments at U S WEST Inc., Englewood, Colo., oversees the firm's $4 billion 401(k) plan. He said transfer activity was "minimal," with only about $12 million shifted to other asset classes from equities during the last week in October. Normal weekly volume is $10 million, he said.

    Richard Dunn, program manager-qualified plans at General Electric Co., Stamford, Conn., said there was as much participant switching into equity funds as out during that week. GE has a $13 billion 401(k) plan.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit