Alight: 401(k) participants hit pause button on trading in May

Participants in 401(k) plans took a trading breather in May, with mild overall activity and no days of above-normal trading frequency, Alight Solutions reported Tuesday in releasing its monthly 401(k) index.

"May was the lightest month of trading activity for 401(k) investors in 2020," the Alight report said. "On average, 0.018% of balances were traded daily — down from 0.023% in April and 0.078% in March."

The biggest sources of trading inflows in May were bond funds (31% of allocations), international equity funds (23%) and money market funds (19%). The biggest sources of trading outflows were target-date funds (48%), large-cap domestic equity funds (28%) and company stock (13%).

Target-date funds also had the highest rate of contributions (46%), followed by U.S. large-cap equity funds (21%) and international equity funds (7%).Target-date funds' prominence as a qualified default investment alternative has led to strong contributions rate.

The average asset allocation in equities was 65.4% in May vs. 64.7% in April and 63.1% in March.

There were no above normal trading days in May compared with three in April and 18 in March. The latter figure, a byproduct of the coronavirus economic impact, was the largest monthly number since the Alight 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 Alight report said.

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