497 1 hit-497_0719.htm DEFINITIVE MATERIALS

 

AFL-CIO HOUSING INVESTMENT TRUST

Portfolio Performance Commentary:

July 2019

 

For the month of July 2019, the AFL-CIO Housing Investment Trust (HIT) had a gross return of 0.18% and a net return of 0.15%. Its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (Barclays Aggregate), reported a return of 0.22% for the month.

July gross relative performance: -0.04%

Performance for periods ended July 31, 2019

(Returns for periods exceeding one year are annualized)

        YTD   1 Year   3 Year   5 Year   10 Year  
  HIT Total Gross Rate of Return     6.39%   8.77%   2.57%   3.37%   4.03%  
  HIT Total Net Rate of Return     6.18%   8.36%   2.17%   2.95%   3.60%  
  Barclays Aggregate Bond Index     6.35%   8.08%   2.17%   3.05%   3.75%  
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 Baclays Aggregate.
•Performance by agency multifamily mortgage-backed securities (MBS) in the HIT’s portfolio as spreads to Treasuries tightened. FHA/Ginnie Mae permanent loan certificates and construction/ permanent loan certificates tightened to Treasuries by approximately 4 and 1 basis points (bps), respectively. Fannie Mae DUS security spreads also tightened with the benchmark 10/9.5s tightening by 2 bps. The HIT had a combined 17.2% of its portfolio in fixed-rate single-asset FHA/Ginnie Mae securities and 23.6% in fixed-rate single-asset DUS securities of various structures at the end of July, where there were no such securities in the Barclay’s Aggregate.
•The portfolio’s slightly short relative duration as Treasury rates rose across most of the curve. Two-, 5-, 7-, and 10-year rates increased by approximately 12, 6, 4, and 1 basis points, respectively, while the 30-year rate was relatively flat.
•Performance by municipal housing bonds in the portfolio which outperformed duration-equivalent Treasuries. The portfolio had a 5.8% allocation to municipal housing bonds, while the Barclays Aggregate had none.

Negative impacts to the HIT’s relative performance included:

•Performance by corporate bonds, the best performing major sector in the Barclays Aggregate, posting an excess return of 63 bps. The HIT does not invest in corporate bonds, whereas the sector comprised 25.0% of the index as of July 31, 2019.
•Performance by agency fixed-rate single family mortgage-backed securities (RMBS), the second best performing major sector in the index, with a 43 bps excess return. The HIT was underweight to this sector with a 15.6% allocation versus 27.2% in the Barclays Aggregate at the end of July.

  

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AFL-CIO HOUSING INVESTMENT TRUST

July 2019 Performance Commentary

 

•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 18, 38, 54, and 74 bps, respectively. Approximately 95.7% of the HIT portfolio was AAA-rated or carried a government or government-sponsored enterprise guarantee, compared to 72.2% for the Barclays Aggregate at month end.

July 2019 Bond Sector Performance

  Sector Absolute Return Excess Return (bps) Modified Adjusted Duration  
  U.S. Treasuries -0.12% 0 6.37  
  Agencies 0.19% 28 4.36  
  Single family agency MBS (RMBS) 0.40% 43 3.07  
  Corporates 0.56% 63 7.68  
  Commercial MBS (CMBS) 0.21% 37 5.28  
  Asset-backed securities (ABS) -0.02% 8 2.12  

Source: Bloomberg L.P.

Change in Treasury Yields

  Maturity 6/30/19 7/31/19 Change  
  1 Month 2.126% 1.988% -0.138%  
  3 Month 2.087% 2.062% -0.025%  
  6 Month 2.090% 2.067% -0.023%  
  1 Year 1.925% 1.985% 0.060%  
  2 Year 1.755% 1.872% 0.117%  
  3 Year 1.706% 1.826% 0.120%  
  5 Year 1.766% 1.827% 0.061%  
  7 Year 1.875% 1.913% 0.038%  
  10 Year 2.005% 2.014% 0.009%  
  30 Year 2.529% 2.525% -0.004%  

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

July 2019 Performance Commentary

 

Portfolio Data as of July 31, 2019

 

  Net Assets $6,427,244,762  
  Portfolio Effective Duration 5.603 years  
  Portfolio Average Coupon 3.32%  
  Portfolio Current Yield1 3.22%  
  Portfolio Yield to Worst1 2.74%  
  Convexity 0.079  
  Maturity 9.890 years  
  Average Price 103.52  
  Number of Holdings 936  

 

 

Portfolio Percentage in Each of the Following Categories: 2

  Agency Single-Family MBS 18.93%  
  CMBS – Agency Multifamily* 68.41%  
  U.S. Treasury Notes/Bonds   4.20%  
  State Housing Permanent Bonds   5.42%  
  State Housing Construction Bonds 0.33%  
  Direct Construction Loan 0.21%  
  Cash & Short-Term Securities  2.50%  

* Includes multifamily MBS (56.50%), multifamily Construction MBS (10.09%),

and AAA Private-Label CMBS (1.81%).

 

Portfolio Duration Distribution, by Percentage in Each Category: 2

Cash 2.50%  
0-0.99 years 12.34%  
1-2.99 years 9.65%  
3-3.99 years 10.75%  
4-5.99 years 18.31%  
6-7.99 years 26.26%  
8-9.99 years 14.27%  
10-14.99 years 3.77%  
15-19.99 years 1.56%  
Over 20 years 0.60%  

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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 Based on total investments and includes unfunded commitments.

 

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AFL-CIO HOUSING INVESTMENT TRUST

July 2019 Performance Commentary

 

Portfolio Data (continued)

 

Maturity Distribution (based on average life):

  0 – 1 year 3.46%
  1 – 2.99 years 5.53%
  3 – 4.99 years 12.33%
  5 – 6.99 years 31.79%
  7 – 9.99 years 36.15%
10 – 19.99 years 8.36%
Greater than 20 years 2.39%

 

 

Quality Distribution:3

U.S. Government or Agency 90.84%
AAA 2.33%
AA 4.12%
A 0.00%
Not Rated 0.21%
Cash 2.50%

    

 

 

 

 

 

 

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

 

OPEIU2

 

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3 Based on total investments and includes unfunded commitments.

 

 

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