Despite rallying equity markets in October, 401(k) plan participants moved $108 million to fixed income from diversified equities, or 0.09% of total assets, according to a news release on Aon Hewitt's monthly 401(k) Index.
By contrast, only $60 million was transferred into fixed income from diversified equities in September, when significant losses shook the stock market. Diversified equities excludes assets in company stock.
However, the largest outflows in October came from company stock funds, with $260 million. In the diversified equity category, U.S. small-cap equity accounted for $45 million in outflows and U.S. large-cap equity, $40 million.
“The general sentiment of employees is fairly low,” said Pamela Hess, director of retirement research at Aon Hewitt, in a phone interview. “Folks are concerned, afraid and don't know what to do.” Ms. Hess said employees do not trust that the market is rebounding and are moving into fixed income where this is less of an opportunity for loss. She added she was surprised by the amount moved out of equities for the month.
GIC/stable value funds, with $307 million, and bond funds, at $123 million, received more than 99% of the October inflows.
The October and September equity outflows, however, are a significant drop from the summer. In July, the outflows totaled $946 million, followed by $432 million in August. October marked the fifth consecutive month of transfers to fixed-income investments.
Despite the outflows, participants' overall equity allocation was up 1.9% to 58.8% at the end of October, due to strong stock market performance, according to the survey, according to the release.
The 401(k) Index universe is made up of Aon Hewitt's record-keeping clients, which have about $100 billion in total assets.