AFL-CIO HOUSING INVESTMENT TRUST
Portfolio Performance Commentary:
June 2018
For the month of June 2018, the AFL-CIO Housing Investment Trust (HIT) had a gross return of -0.13% and a net return of -0.16%. Its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (Barclays Aggregate), reported a return of -0.12% for the month.
June gross relative performance: -0.01%
Performance for periods ended June 30, 2018 (Returns for periods exceeding one year are annualized) | |||||||||||||
| YTD | 1 Year | 3 Year | 5 Year | 10 Year | |||||||||
| HIT Total Gross Rate of Return | -1.38% | -0.19% | 1.82% | 2.60% | 4.12% | ||||||||
| HIT Total Net Rate of Return | -1.58% | -0.59% | 1.40% | 2.17% | 3.68% | ||||||||
| Barclays Capital Aggregate Bond Index | -1.62% | -0.40% | 1.72% | 2.27% | 3.72% | ||||||||
| 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. | |||||||||||||
Positive contributions to the HIT’s performance relative to the Barclays Aggregate included:
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The portfolio’s ongoing yield advantage over the Barclays Aggregate.
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Performance by corporate bonds, the worst performing major sector in the Barclays Aggregate, posting an excess return of -60 basis points (bps). The HIT does not invest in corporate bonds, whereas the sector comprised 25.0% of the index as of June 30, 2018.
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The portfolio’s overweight to the highest credit quality sector of the investment grade universe, whose excess returns were the highest among the four credit ratings buckets (AAA, AA, A, and BBB) of the Barclays Aggregate. Those returns were 1, -24, -53, and -58 bps, respectively. Over 96% of the HIT portfolio was AAA-rated or carried a government or government-sponsored enterprise guarantee, compared to 72% for the Barclays Aggregate at the end of June.
Negative impacts to the HIT’s relative performance included:
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Overall performance by agency multifamily mortgage-backed securities (MBS) in the HIT’s portfolio as spreads to Treasuries widened for most securities. FHA/Ginnie Mae construction/permanent loan certificates tightened by 0.5 bps, but Ginnie Mae permanent loan certificates widened by 11 bps and longer maturity Fannie Mae DUS security spreads also widened. The benchmark 10/9.5 structure spread increased by approximately 3.5 bps and the 12/11.5 structure increased by 11 bps. The HIT had 24.1% of its portfolio in single-asset DUS securities of various structures at the end of June, while there were no such securities in the Barclays Aggregate.
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AFL-CIO HOUSING INVESTMENT TRUST |
June 2018 Performance Commentary |
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Performance by agency fixed-rate single family mortgage-backed securities (RMBS), the best performing major sector in the index, with an excess return of 3 bps. The HIT was underweight to this sector with a 17.5% allocation versus 28.1% in the Barclays Aggregate at the end of June.
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The portfolio’s overweight to spread-based assets as swap spreads widened across most maturities. Five, 7-, and 10-year spreads increased by 2 bps, while 2-year spreads decreased by 0.5 bps. At the end of June, 95.9% of the HIT’s portfolio was invested in spread based assets (4.1% in cash/cash equivalents and Treasuries) compared to 62.2% spread assets in the Barclays Aggregate (37.8% in Treasuries).
June 2018 Bond Sector Performance
| Sector | Absolute Return |
Excess Return (bps) |
Modified Adjusted Duration |
| U.S. Treasuries | 0.02% | 0 | 6.10 |
| Agencies | 0.03% | 1 | 4.19 |
| Single family agency MBS (RMBS) | 0.05% | 3 | 5.10 |
| Corporates | -0.58% | -60 | 7.26 |
| Commercial MBS (CMBS) | -0.17% | -14 | 5.31 |
| Asset-backed securities (ABS) | 0.05% | 1 | 2.11 |
| Source: Bloomberg L.P. |
Change in Treasury Yields
| Maturity | 05/31/18 | 6/30/18 | Change |
| 1 Month | 1.736% | 1.743% | 0.007% |
| 3 Month | 1.895% | 1.912% | 0.018% |
| 6 Month | 2.077% | 2.105% | 0.028% |
| 1 Year | 2.223% | 2.312% | 0.089% |
| 2 Year | 2.427% | 2.528% | 0.101% |
| 3 Year | 2.550% | 2.622% | 0.072% |
| 5 Year | 2.696% | 2.738% | 0.042% |
| 7 Year | 2.806% | 2.822% | 0.016% |
| 10 Year | 2.859% | 2.860% | 0.002% |
| 30 Year | 3.025% | 2.989% | -0.036% |
| 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. 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 |
June 2018 Performance Commentary |
Portfolio Data as of June 30, 2018
| Net Assets | $5,986,004,988 |
| Portfolio Effective Duration | 5.539 years |
| Portfolio Average Coupon | 3.34% |
| Portfolio Current Yield1 | 3.37% |
| Portfolio Yield to Worst1 | 3.49% |
| Convexity | 0.062 |
| Maturity | 9.422 years |
| Average Price | 98.96 |
| Number of Holdings | 986 |
Portfolio Percentage in Each of the Following Categories: 2
| Agency Single-Family MBS | 22.25% |
| CMBS – Agency Multifamily* | 67.74% |
| U.S. Treasury Notes/Bonds | 3.08% |
| State Housing Permanent Bonds | 5.01% |
| State Housing Construction Bonds | 0.83% |
| Direct Construction Loan | 0.09% |
| Cash & Short-Term Securities | 1.00% |
| *Includes multifamily MBS (58.26%), multifamily Construction MBS (7.60%), and AAA Private-Label CMBS (1.88%). | |
Portfolio Duration Distribution, by Percentage in Each Category: 2
| Cash | 1.00% | |
| 0-0.99 years | 15.98% | |
| 1-2.99 years | 7.17% | |
| 3-3.99 years | 6.74% | |
| 4-5.99 years | 26.75% | |
| 6-7.99 years | 21.44% | |
| 8-9.99 years | 16.62% | |
| 10-14.99 years | 2.94% | |
| 15-19.99 years | 1.36% | |
| Over 20 years | 0.00% |
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
Based on total investments and includes unfunded commitments.
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AFL-CIO HOUSING INVESTMENT TRUST |
June 2018 Performance Commentary |
Portfolio Data (continued)
Maturity Distribution (based on average life):
| 0 – 1 year | 5.03% |
| 1 – 2.99 years | 6.17% |
| 3 – 4.99 years | 16.97% |
| 5 – 6.99 years | 21.95% |
| 7 – 9.99 years | 35.93% |
| 10 – 19.99 years | 11.56% |
| Greater than 20 years | 2.39% |
Quality Distribution:3
| U.S. Government or Agency | 92.47% |
| AAA | 2.66% |
| AA | 3.78% |
| A | 0.00% |
| Not Rated | 0.09% |
| Cash | 1.00% |
AFL-CIO Housing Investment Trust
2401 Pennsylvania Avenue, NW, Suite 200, Washington, DC 20037
Phone (202) 331-8055 Fax (202) 331-8190
www.aflcio-hit.com
3
Based on total investments and includes unfunded commitments.
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