AFL-CIO HOUSING INVESTMENT TRUST
Highlights – 3rd Quarter 2016
For the periods ended September 30, 2016, the AFL-CIO Housing Investment Trust’s (HIT) gross returns exceeded its benchmark, the Barclays Capital Aggregate Bond Index (Barclays Aggregate), for the quarter, 3-, 5-, and 10-year periods by 19, 54, 47, and 40 basis points, respectively. On a net basis, the HIT outperformed the benchmark for the quarter, 3-, and 5-year periods by 9, 9, and 3 bps, respectively.
Performance for periods ended September 30, 2016 (Returns for periods exceeding one year are annualized) |
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Quarter | YTD | 1 Year | 3 Year | 5 Year | 10 Year | ||||||||
HIT Total Gross Rate of Return | 0.65% | 5.42% | 4.80% | 4.57% | 3.55% | 5.19% | |||||||
HIT Total Net Rate of Return | 0.55% | 5.09% | 4.36% | 4.12% | 3.11% | 4.74% | |||||||
Barclays Capital Aggregate Bond Index | 0.46% | 5.80% | 5.19% | 4.03% | 3.08% | 4.79% | |||||||
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. |
After a weak first half of the year, U.S. economic growth appears to have picked up in the third quarter. After falling for much of the year, U.S. Treasury rates rose for the quarter overall as some domestic economic measures showed relative strength and the market anticipated less accommodative monetary policy. At the same time, spread-based assets tightened relative to Treasuries, providing positive returns for corporate bonds as well as the HIT’s portfolio.
Positive contributions to the HIT’s performance in the third quarter relative to the Barclays Aggregate included:
Negative impacts to the HIT’s performance included:
AFL-CIO HOUSING INVESTMENT TRUST | 2016 Q3 Highlights |
Although the Federal Reserve continues to prepare the markets for less accommodative monetary policy, possibly including a rate hike by year end, it has also indicated that it can be patient and raise rates gradually. The HIT will continue to manage its duration to be slightly shorter than the Barclays Aggregate. This duration strategy, along with the portfolio’s higher yield, should lead to relatively better performance versus the benchmark if interest rates rise. However, the portfolio’s duration will still be long enough to generate strong absolute returns in the event interest rates fall due to disappointing economic growth or geopolitical crisis. As it enters the last quarter of the year, the HIT’s superior portfolio fundamentals, which are expected to continue to offer higher income, higher credit quality, and similar interest rate risk relative to the benchmark, should position it well.
Third Quarter Bond Sector Performance
Sector | Absolute Return |
Excess Return (bps) |
Modified Adjusted Duration |
U.S. Treasuries | -0.28% | 0 | 6.39 |
Agencies | 0.25% | 44 | 4.21 |
Single family agency MBS (RMBS) | 0.60% | 64 | 2.50 |
Corporates | 1.41% | 173 | 7.52 |
Commercial MBS (CMBS) | 0.59% | 91 | 5.54 |
Asset-backed securities (ABS) | 0.20% | 26 | 2.33 |
Source: Bloomberg L.P. |
Change in Treasury Yields
Maturity | 6/30/2016 | 9/30/16 | Change |
3 Month | 0.259% | 0.274% | 0.015% |
6 Month | 0.350% | 0.432% | 0.081% |
1 Year | 0.432% | 0.585% | 0.153% |
2 Year | 0.582% | 0.762% | 0.180% |
3 Year | 0.693% | 0.875% | 0.182% |
5 Year | 1.000% | 1.149% | 0.150% |
7 Year | 1.279% | 1.422% | 0.143% |
10 Year | 1.470% | 1.594% | 0.125% |
30 Year | 2.285% | 2.315% | 0.031% |
Source: Bloomberg L.P. |
Investors should consider the HIT's investment objectives, risks, and charges and expenses carefully before investing. This and other information is contained in the HIT's prospectus. To obtain a prospectus, call the HIT at 202-331-8055 or visit www.aflcio-hit.com. The prospectus should be read carefully before investing. The Barclays Aggregate is an unmanaged index and is not available for direct investment, although certain funds attempt to replicate this index. Returns for the Barclays Aggregate would be lower if they reflected the actual trading costs or expenses associated with management of an actual portfolio.
This document contains forecasts, estimates, opinions, and/or other information that is subjective. Statements concerning economic, financial, or market trends are based on current conditions, which will fluctuate. There is no guarantee that such statements will be applicable under all market conditions, especially during periods of downturn. It should not be considered as investment advice or a recommendation of any kind. The calculations of the HIT yield herein represent widely accepted portfolio characteristics information based on coupon rate, current price and, for yield to worst, certain prepayment assumptions, and are not current yield or other performance data as defined by the SEC in Rule 482.
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AFL-CIO HOUSING INVESTMENT TRUST | 2016 Q3 Highlights |
Portfolio Data as of September 30, 2016
Net Assets | $5,988,029,238 |
Portfolio Effective Duration | 5.267 years |
Portfolio Average Coupon | 3.18% |
Portfolio Current Yield1 | 3.10% |
Portfolio Yield to Worst | 2.18% |
Convexity | 0.142 |
Maturity | 9.564 years |
Average Price | 105.56 |
Number of Holdings | 973 |
Portfolio Percentage in Each of the Following Categories: 2
Multifamily MBS | 66.83% |
Agency Single-Family MBS | 19.66% |
U.S. Treasury | 9.73% |
AAA Private-Label CMBS | 2.39% |
Cash & Short-Term Securities | 1.39% |
Portfolio Percentage in Each of the Following Categories: 2
Agency Single-Family MBS | 19.66% |
CMBS – Agency Multifamily* | 63.71% |
U.S. Treasury Notes/Bonds | 9.73% |
State Housing Permanent Bonds | 5.23% |
State Housing Construction Bonds | 0.15% |
Direct Construction Loan | 0.13% |
Cash & Short-Term Securities | 1.39% |
* Includes multifamily MBS (55.92%), AAA Private-Label CMBS (2.39%), and multifamily Construction MBS (5.40%). |
Geographical Distribution of Long-Term Portfolio: 3
West | 10.12% |
Midwest | 15.23% |
South | 8.13% |
East | 19.09% |
National Mortgage Pools | 47.43% |
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1 The calculations of the HIT yield herein represent widely accepted portfolio characteristics information based on coupon rate, current price and, for yield to worst, certain prepayment assumptions, and are not current yield or other performance data as defined by the SEC in Rule 482.
2 Percentages weighted by unfunded construction-related security purchase commitments.
3 Excludes cash and short-term equivalents, U.S. Treasury and agency securities.
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AFL-CIO HOUSING INVESTMENT TRUST | 2016 Q3 Highlights |
Portfolio Data (continued)
Portfolio Duration Distribution, by Percentage in Each Category: 4
Cash | 1.39% | 5-5.99 years | 9.11% | |
0-0.99 years | 11.46% | 6-6.99 years | 7.57% | |
1-1.99 years | 6.55% | 7-7.99 years | 5.85% | |
2-2.99 years | 14.56% | 8-8.99 years | 10.59% | |
3-3.99 years | 13.26% | 9-9.99 years | 4.30% | |
4-4.99 years | 9.58% | Over 10 years | 5.78% |
Maturity Distribution (based on average life):
0 – 1 year | 4.99% |
1 – 2.99 years | 9.80% |
3 – 4.99 years | 35.88% |
5 – 6.99 years | 18.13% |
7 – 9.99 years | 19.36% |
10 – 19.99 years | 7.81% |
Greater than 20 years | 4.03% |
Quality Distribution: 4
U.S. Government or Agency | 92.22% |
AAA | 2.39% |
AA | 3.87% |
A | 0.00% |
Not Rated | 0.13% |
Cash | 1.39% |
Bond Sector Distribution: 4,5
MBS | 90.14% |
Treasury | 9.86% |
Agency | 0.00% |
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4 Percentages weighted by unfunded construction-related security purchase commitments.
5 Excludes cash and short-term equivalents.
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