For the first time since the start of the Great Recession, more money in 401(k) accounts flowed out of bond funds than into them in 2013, according to an Aon Hewitt analysis.
A half a decade of strong stock performance, with double digit increases last year alone, left its mark on 401(k) allocations, with equities reclaiming their traditional place in participant portfolios. In all, 34.8 percent of all allocations were in bonds, compared to a high 52.3 percent at the end of 2007. The average since the index was started in 1997 has been 35.4 percent allocated to bonds.
Along with rising stock prices, transfers from fixed income funds helped change the balance of allocations. Aon Hewitt's 401(k) Index also found that $2.82 billion was transferred to equities, the largest such move since 2003.
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As the markets rose throughout the year, participants were more active in moving their assets than the previous year. In fact, 47 days saw higher than average changes in allocation, more than the twice the number the previous year.
By the end of the year, about two-thirds (65.2 percent) of all 401(k) money was allocated to equities, up from 59.4 percent at the end of the previous year.
In all, transfers from bond funds equaled $1.86 billion, 51 percent of all transfers between asset classes. That left 34.8 percent of allocations in fixed income instruments at the end of 2013.
Increased confidence on the part of retirement plan participants in equities was evident in investment elections. Such allocations grew last year from 61.7 percent at the start of 2013 to a high of 65.2 percent in November. The figure dipped to 64.1 percent at the end of the year.
One equity class that continued to fall from favor was company stock, which saw its allocation drop to 11 percent of 401(k) assets, a half a percentage point for the year.
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