US- Participants in 401(k) plans have shifted toward fixed income investments following an 11% fall in the Dow Jones Industrial Average in February, according to the Hewitt 401(k) index observations.
Guaranteed income contracts/stable funds reaped 78% of inflows during the month, gaining $526m. Bond and money market funds experienced smaller inflows, achieving $45m and $21m respectively. Company stock funds, also gained positive inflows amounting to $81m.
Conversely, almost every equity asset class saw outflows during February. Large US equity lost the most, with outflows of $183m. Lifestyle funds were also hit, seeing $141m in outflows, while international funds experienced outflows of £120m.
The largest transfer activity occurred on February 23 when US stocks closed 3% for the day and indices retreating to a level not experienced since 1997. In response, 401(k) investors moved $116m from equity to fixed income investments, compared with the daily average shift of $40m during the month. As a result, the overall fixed income allocation in the Hewitt 401(k) index surpassed equity allocation for the first time since the index's inception.
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