Performance for periods ended October 31, 2015
(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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2.11%
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3.10%
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2.24%
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3.58%
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5.21%
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HIT Total Net Rate of Return
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1.74%
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2.66%
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1.79%
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3.13%
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4.77%
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Barclays Capital Aggregate Bond Index
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1.14%
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1.96%
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1.65%
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3.03%
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4.72%
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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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•
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The HIT’s ongoing yield advantage over the Barclays Aggregate.
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•
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Mixed performance by agency multifamily mortgage-backed securities (MBS) relative to Treasuries. FHA/Ginnie Mae multifamily permanent loan certificate spreads tightened by 9 basis points (bps) and Fannie Mae multifamily DUS spreads tightened across structures, with the spread on the benchmark 10/9.5 structure contracting by 10 bps. At the same time, FHA/Ginnie Mae multifamily construction/permanent loan certificate spreads widened by 9 bps. The HIT had 22.0% of its portfolio invested in DUS securities across various structures on October 31.
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The portfolio’s relative short duration as interest rates rose across the curve. Two-, 5-, 10-, and 30-year Treasury rates increased by 10, 16, 11, and 7 bps, respectively.
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•
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The HIT’s overweight to spread product as swap spreads tightened across the curve. Five-, 7-, and 10-year swap spreads tightened by 5, 6, and 5 bps, respectively.
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Very strong performance by corporate bonds, the best performing major sector in the Barclays Aggregate, with excess returns of 85 bps. The HIT does not invest in corporate bonds, whereas the sector comprised 24.2% of the index at the end of October.
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Good performance by agency fixed rate single family mortgage-backed securities (RMBS), the second best performing major sector in the index with excess returns of 37 bps. The HIT is underweight to this sector with a 24.4% allocation versus 28.4% in the Barclays Aggregate. Mitigating this, however, was the portfolio’s overweight toward floating rate single family MBS, which outperform in a rising interest rate environment.
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The portfolio’s overweight to the highest credit quality sector of the investment grade universe, whose excess returns were the lowest among the four credit ratings buckets (AAA, AA, A, and BBB) of the Barclays Aggregate. Those returns were 16, 55, 72, and 129 bps, respectively. The HIT has an overweight with respect to the index in high credit quality investments. Approximately 95% of the HIT portfolio had a AAA profile or carried a government or government-sponsored enterprise guarantee compared to 72% for the Barclays Aggregate at the end of October.
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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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-0.37%
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0
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5.84
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Agencies
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0.13%
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40
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4.04
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Single family agency MBS (RMBS)
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0.07%
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37
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4.29
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Corporates
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0.42%
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85
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7.15
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Commercial MBS (CMBS)
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-0.17%
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25
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4.88
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Asset-backed securities (ABS)
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-0.22%
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-6
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2.40
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Change in Treasury Yields | |||
Maturity
|
9/31/15
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10/31/15
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Change
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1 Month
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-0.018%
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0.003%
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0.020%
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3 Month
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-0.015%
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0.074%
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0.089%
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6 Month
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0.069%
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0.226%
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0.158%
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1 Year
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0.313%
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0.324%
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0.010%
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2 Year
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0.631%
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0.726%
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0.095%
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3 Year
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0.902%
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1.025%
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0.123%
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5 Year
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1.358%
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1.519%
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0.161%
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7 Year
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1.737%
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1.886%
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0.149%
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10 Year
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2.038%
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2.143%
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0.105%
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30 Year
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2.854%
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2.923%
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0.068%
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Source: Bloomberg L.P.
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