AFL-CIO HOUSING INVESTMENT TRUST  

Portfolio Performance Commentary:

December 2018

For the month of December 2018, the AFL-CIO Housing Investment Trust (HIT) had a gross return of 1.63% and a net return of 1.58%. Its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (Barclays Aggregate), reported a return of 1.84% for the month.

December gross relative performance: -0.21%

Performance for periods ended December 31, 2018 (Returns for periods exceeding one year are annualized)
		Quarter	1 Year	3 Year	5 Year	10 Year
	HIT Total Gross Rate of Return	2.07%	0.58%	2.16%	2.91%	3.86%
	HIT Total Net Rate of Return	1.95%	0.16%	1.75%	2.48%	3.42%
	Barclays Aggregate Bond Index	1.64%	0.01%	2.06%	2.52%	3.48%
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:

● The portfolio’s ongoing yield advantage over the Barclays Aggregate.

● Performance by corporate bonds, the worst performing major sector in the Barclays Aggregate, posting an excess return of -106 basis points (bps). The HIT does not invest in corporate bonds, whereas the sector comprised 24.3% of the index as of December 31, 2018.

● 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 -7, -38, -87, and -129 bps, respectively. Approximately 95.6% of the HIT portfolio was AAA-rated or carried a government or government-sponsored enterprise guarantee, compared to 72.8% for the Barclays Aggregate at the end of December.

● The portfolio’s overweight to spread-based assets as swap spreads tightened across all maturities. Two-, 5-, 7-, and 10-year spreads decreased by approximately 1, 8, 4, and 2 bps, respectively. At the end of December, 96.8% of the HIT’s portfolio was invested in spread based assets (3.2% in cash/cash equivalents and Treasuries) compared to 61.1% spread assets in the Barclays Aggregate (38.9% in Treasuries).

Negative impacts to the HIT’s relative performance included:

● Overall performance by agency multifamily mortgage-backed securities (MBS) in the HIT’s portfolio as spreads to Treasuries widened.

● FHA/Ginnie Mae construction/permanent loan certificates widened to Treasuries by approximately 12 bps and permanent loan certificates widened by 17 bps.

1

AFL-CIO HOUSING INVESTMENT TRUST December 2018 Performance Commentary

● Fannie Mae DUS security spreads widened on longer maturity structures, with the benchmark 10/9.5s widening by 5.5 basis points.

● The HIT had a combined 16.9% of its portfolio in fixed-rate single-asset FHA/Ginnie Mae securities and 23.8% in fixed-rate single-asset DUS securities of various structures at the end of December, while there were no such securities in the Barclays Aggregate.

● The portfolio’s slightly short relative duration as Treasury rates fell across the curve. Two-, 5-, 7-, 10- and 30-year rates decreased by 30, 30, 31, 30 and 28 bps, respectively.

● Performance by agency fixed-rate single family mortgage-backed securities (RMBS), the second best performing major sector in the index, with a -15 bps excess return. The HIT was underweight to this sector with a 17.6% allocation versus 28.2% in the Barclays Aggregate at the end of December.

December 2018 Bond Sector Performance

Sector	Absolute Return	Excess Return (bps)	Modified Adjusted Duration
U.S. Treasuries	2.15%	0	6.10
Agencies	1.42%	-16	4.22
Single family agency MBS (RMBS)	1.81%	-15	4.73
Corporates	1.47%	-106	7.10
Commercial MBS (CMBS)	1.62%	-40	5.30
Asset-backed securities (ABS)	0.79%	-8	2.15
Source: Bloomberg L.P.

Change in Treasury Yields

Maturity	11/30/18	12/31/18	Change
1 Month	2.305%	2.425%	0.120%
3 Month	2.342%	2.355%	0.013%
6 Month	2.520%	2.475%	-0.044%
1 Year	2.678%	2.596%	-0.082%
2 Year	2.786%	2.488%	-0.299%
3 Year	2.800%	2.456%	-0.343%
5 Year	2.812%	2.511%	-0.301%
7 Year	2.897%	2.586%	-0.312%
10 Year	2.988%	2.684%	-0.304%
30 Year	3.290%	3.015%	-0.276%
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.

2

AFL-CIO HOUSING INVESTMENT TRUST December 2018 Performance Commentary

Portfolio Data as of December 31, 2018

Net Assets	$5,889,450,120
Portfolio Effective Duration	5.573 years
Portfolio Average Coupon	3.36%
Portfolio Current Yield1	3.42%
Portfolio Yield to Worst1	3.48%
Convexity	0.077
Maturity	9.710 years
Average Price	99.18
Number of Holdings	963

Portfolio Percentage in Each of the Following Categories: ²

Agency Single-Family MBS	21.92%
CMBS – Agency Multifamily*	68.41%
U.S. Treasury Notes/Bonds	2.23%
State Housing Permanent Bonds	5.66%
State Housing Construction Bonds	0.70%
Direct Construction Loan	0.08%
Cash & Short-Term Securities	1.00%
* Includes multifamily MBS (57.16%), multifamily Construction MBS (9.33%), and AAA Private-Label CMBS (1.92%).

Portfolio Duration Distribution, by Percentage in Each Category: ²

Cash	1.00%
0-0.99 years	15.34%
1-2.99 years	6.81%
3-3.99 years	7.59%
4-5.99 years	25.66%
6-7.99 years	22.06%
8-9.99 years	16.16%
10-14.99 years	4.08%
15-19.99 years	1.30%
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.

3

AFL-CIO HOUSING INVESTMENT TRUST December 2018 Performance Commentary

Portfolio Data (continued)

Maturity Distribution (based on average life):

0 – 1 year	4.99%
1 – 2.99 years	5.60%
3 – 4.99 years	10.37%
5 – 6.99 years	25.79%
7 – 9.99 years	38.84%
10 – 19.99 years	12.46%
Greater than 20 years	1.94%

Quality Distribution:³

U.S. Government or Agency	91.91%
AAA	2.71%
AA	4.30%
A	0.00%
Not Rated	0.08%
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.

4