Bond outflows grew last month, according to the Aon Hewitt June 401(k) Index & Observations. Net outflows decreased by $300 million or 62%.
The outflows are “consistent with what the broad investment industry is seeing.”says Winfield Evans, Director of Investment Strategy for Aon Hewitt’s outsourcing business.
He says that the “spiky” nature of interest rates last month and events like comments from Fed Chairman Ben Bernanke have impacted investments in and out of the bond market.
Net inflows, however, have had no real discernable asset class into which they are being invested. For example, GIC/stable value funds, received $141 million (29%), large U.S. funds received $122 million (25%), and money market funds received $71 million (15%). Mid U.S., small U.S., and international funds also had significant gains from transfer activity. Inflows for the second quarter were led by international funds, which received $169 million (19%); large U.S. received $152 million (17%), while mid U.S. and premixed funds each received about 15% of the flows. GIC/stable value and money market funds had significant inflows as well (14% and 12%, respectively).
Evans speculates that this diversity of different categories suggests there is no one clear answer in the market and no consensus of a particular strategy. “It’s a difficult time in the capital markets,” adds Evans. “There is no clear path for many investors…People are doing what’s right for their particular circumstance but there is no overarching place where people are flooding to.”
What advisers might extrapolate from Aon’s data, and the lack of direction being shown by investors, is the need for further planning and advice towards investors and 401(k) participants, for example.
The flipside of the coin shows that for the first six months of the year, the category that received the most amount of inflows was what Aon calls “pre-mixed” or target-date funds.
Other points of note from the Index shows that participant daily transfers volumes and contributions have remained fairly steady last month. By the end of June, participants’ overall equity allocation decreased to 62.2% from 62.5% at the end of May. The second quarter began with participant’s equity allocation at 61.8% of total assets.
Joel Kranc is Director of Kranc Communications, focusing on business communications, content delivery and marketing strategies. He has written and worked in the retirement and institutional investment space for 17 years covering North American markets, large institutional pensions and the adviser community. firstname.lastname@example.org
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