401(k) participants fled equity-heavy funds in March – Alight

Heavy trading by 401(k) participants during March led to significant inflows to fixed-income investments, according to a monthly 401(k) index from Alight Solutions LLC.

Trading inflows “overwhelmingly “went to stable value (64%), money market funds (24%) and bond funds (6%), a report posted on the firm’s website said.

The biggest source of outflows were target-date funds (48%), large U.S. equity funds (29%) and international equity funds (6%). Within the target-date funds category, Alight includes target-risk funds, which it said represents less than 10% of the category.

“After reflecting market movements and trading activity, average asset allocation in equities decreased from 66% in February to 63.1% in March,” the report said. “New contributions to equities decreased from 68.2% in February to 67.3% in March.”

Although target-date funds were the biggest source of trading outflows in March, they also were the biggest source of contributions (44%) in March, followed by large cap domestic equity funds (21%) and international equity funds (8%).

Alight officials have said in the past that target-date funds are the leading source of contributions due to their dominance as a qualified default investment alternative.

Target-date funds remain the largest asset category with 29% in March, followed by large cap domestic equity (24%) and stable value (12%).

The index covers more than 2 million participants with more than $200 billion in Alight record-kept accounts.

The Alight report also noted that March had 18 “above-normal” days of trading activity — the most in a month since the index was created in 1997.

“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,” the report said.