Performance for periods ended June 30, 2014
(Returns for periods exceeding one year are annualized)
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YTD
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1 Year
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3 Year
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5 Year
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10 Year
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HIT Total Gross Rate of Return
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4.42%
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4.91%
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4.05%
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4.98%
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5.38%
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HIT Total Net Rate of Return
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4.19%
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4.45%
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3.60%
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4.52%
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4.94%
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Barclays Capital Aggregate Bond Index
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3.93%
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4.37%
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3.66%
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4.85%
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4.93%
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The performance data quoted represents past performance and is no guarantee of future results. Investment results and principal value will fluctuate so that units in the HIT, when redeemed, may be worth more or less than their original cost. The HIT's current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end is available from the HIT's website at www.aflcio-hit.com. Gross performance figures do not reflect the deduction of HIT expenses. Net performance figures reflect the deduction of HIT expenses and are the performance figures investors experience in the HIT. Information about HIT expenses can be found on page 1 of the HIT’s current prospectus.
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The HIT’s ongoing yield advantage over the Barclays Aggregate.
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Strong performance of the HIT’s agency multifamily mortgage-backed securities (MBS) as spreads to Treasuries tightened for both government-sponsored enterprise (GSE) and FHA/Ginnie Mae-insured multifamily MBS. Ginnie Mae permanent and construction/ permanent loan certificate spreads tightened by about 21 basis points (bps) and 16 bps, respectively. Fannie Mae multifamily DUS security spreads tightened across all structures, with the benchmark 10/9.5s contracting by about 11 bps and intermediate duration 7/6.5s tightening by 6 bps. The HIT had 21.7% of its portfolio invested in DUS securities across various structures as of June 30, 2014, whereas the Barclays Aggregate does not hold DUS securities.
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The portfolio’s slightly short relative duration as interest rates rose across the yield curve. Two-, 5-, 10-, and 30-year Treasury rates increased by 8, 9, 6, and 3 bps, respectively. At month-end the portfolio’s duration was approximately 0.52 years shorter than the index.
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Strong performance by corporate bonds, the second best performing major sector in the Barclays Aggregate with excess returns of 26 bps. The HIT does not invest in corporate bonds, whereas the sector comprised 23.3% of the index as of June 2014.
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Good performance by agency single family MBS (RMBS), the best performing major sector in the index with excess returns of 42 bps. The HIT is underweight in RMBS with an allocation of 26.3% versus 28.9% in the Barclays Aggregate at the end of June.
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The portfolio’s overweight to the highest credit quality sector of the investment grade universe, whose excess returns were the second lowest among the four credit ratings buckets (AAA, AA, A, and BBB) of the Barclays Aggregate. Those returns were 18, 11, 23, and 38 bps, respectively. The HIT has an overweight with respect to the index in high credit quality investments. Over 93% of the HIT portfolio was AAA-rated or carried a government or government-sponsored enterprise guarantee compared to less than 72% for the Barclays Aggregate as of June 30.
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Sector
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Absolute
Return
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Excess Return
(bps)
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Modified Adjusted
Duration
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U.S. Treasuries
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-0.14%
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0
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5.26
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Agencies
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0.04%
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16
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4.13
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Single family agency MBS (RMBS)
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0.26%
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42
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5.06
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Corporates
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0.08%
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26
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7.12
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Commercial MBS (CMBS)
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0.18%
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29
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3.90
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Asset-backed securities (ABS)
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0.04%
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11
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2.42
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Maturity
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5/31/14
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6/30/14
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Change
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1 Month
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0.038%
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0.008%
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-0.030%
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3 Month
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0.033%
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0.023%
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-0.010%
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6 Month
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0.048%
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0.063%
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0.015%
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1 Year
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0.094%
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0.101%
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0.008%
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2 Year
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0.375%
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0.459%
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0.084%
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3 Year
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0.774%
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0.868%
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0.094%
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5 Year
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1.540%
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1.631%
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0.091%
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7 Year
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2.059%
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2.136%
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0.077%
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10 Year
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2.477%
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2.531%
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0.055%
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30 Year
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3.328%
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3.360%
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0.032%
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