497 1 ahit-497_113021.htm DEFINITIVE MATERIALS

 

 

Performance Commentary | October 2021

 

For October 2021, the AFL-CIO Housing Investment Trust (HIT) had a gross return of -0.14% and a net return of -0.16%. Its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (Barclays Aggregate or Index), reported a return of -0.03% for the month.

 

 

The performance data quoted represents past performance and is no guarantee of future results. Periods over one year are annualized. Investment results and principal value will fluctuate so that units in the HIT, when redeemed, may be worth more or less than the original cost. The HIT’s current performance data may be lower or higher than the performance data 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 returns that HIT’s investors obtain. Information about HIT expenses can be found on page 1 of the HIT’s current prospectus.

 

Positive contributions to HIT’s relative performance vs. Barclays Aggregate included:

●The portfolio’s ongoing yield advantage over the Barclays Aggregate. As of October 31, 2021, the HIT had a yield advantage of 27 basis points (bps).

●Performance by agency multifamily mortgage-backed securities (MBS) in the HIT’s portfolio as nominal spreads to Treasuries tightened. FHA/Ginnie Mae permanent and construction/permanent loan certificates tightened to Treasuries by 9.8 and 9.6 bps, respectively. Nominal spreads on longer maturity Fannie Mae DUS security structures also tightened, with the benchmark 10/9.5s tightening by approximately 4 bp. The HIT had 19.0% and 23.9% of its portfolio in fixed-rate single-asset FHA/Ginnie Mae securities and Fannie Mae DUS securities, respectively. There were no such securities in the Barclay’s Aggregate.

●The portfolio’s short relative duration versus the benchmark as rates sold off across most of the curve. The 2-, 5-, 7-, 10- rates increased by 22.2, 21.8, 16.5, and 6.5, respectively, while the 30- rate decreased by 11.2 bps

●The portfolio’s underweight to agency-insured, fixed-rate single family mortgage-backed securities (SF MBS), the worst performing major asset class in the benchmark on an excess return and total return basis. The portfolio is underweight fixed rate SF MBS with a 10.9% allocation compared to 27.3% in the Barclays Aggregate.

 

Negative impacts to HIT’s relative performance included:  

●The portfolio’s underweight to corporate bonds, the best performing major sector in the Index, posting a total return of 25 bps for the month. The HIT does not invest in corporate bonds, whereas the sector comprised approximately 26.1% of the Index as of October 2021.

 

1227 25TH STREET, NW | SUITE 500 | WASHINGTON, DC 20037 | P: 202-331-8088

 

 

 

 

October 2021 Portfolio Commentary

 

●Performance by some agency multifamily MBS in the HIT’s portfolio which experienced spread widening relative to Treasuries. Spreads on Ginnie Mae REMIC structures widened by 4 bps during October. At the end of October, the HIT portfolio had a 14.4% allocation to REMICS, while there were no such securities in the Barclay’s Aggregate.

 

Market Data

 

October 2021 Bond Sector Performance

Sector  Absolute
Return		  Excess Return
(bps)		  Modified Adjusted
Duration
U.S. Treasuries  -0.07%  0   7.09 
Agencies  -0.40%  -11   4.05 
Single family agency MBS (RMBS)  -0.19%  -1   4.63 
Corporates  0.25%  0   8.71 
Commercial MBS (CMBS)  -0.39%  6   5.11 
Asset-backed securities (ABS)  -0.35%  -7   2.31 
Source: Bloomberg L.P.            

 

Change in Treasury Yields

Maturity 9/30/21 10/31/21 Change
1 Month 0.043% 0.048% 0.005%
3 Month 0.033% 0.048% 0.015%
6 Month 0.046% 0.056% 0.010%
1 Year 0.068% 0.119% 0.051%
2 Year 0.276% 0.497% 0.222%
3 Year 0.508% 0.754% 0.245%
5 Year 0.965% 1.183% 0.218%
7 Year 1.285% 1.450% 0.165%
10 Year 1.487% 1.552% 0.065%
20 Year 1.988% 1.970% -0.018%
30 Year 2.045% 1.933% -0.112%
Source: Bloomberg L.P.

 

Investors should consider the HIT’s investment objectives, risks and expenses carefully before investing. Investors may view the HIT’s current prospectus, which contains more complete information, on its website at www.aflcio-hit.com and may obtain a copy from the HIT by calling the Marketing and Investor Relations Department collect at 202-331-8055. Investors should read the current prospectus 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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October 2021 Portfolio Commentary

 

Portfolio Data as of October 31, 2021

 

Net Assets $7,043.69 million      
Portfolio Effective Duration 6.068 years   Convexity 0.190
Portfolio Average Coupon 2.62%   Maturity 10.66 years
Portfolio Yield to Worst1 1.90%   Portfolio Current Yield1 2.52%
Number of Holdings 935   Average Price2 103.96

 

Sector Allocations: 3

 

Multifamily Investments 80.60%   CMBS – Agency Multifamily* 70.85%
Agency Single-Family MBS 11.40%   Agency Single-Family MBS 11.40%
U.S. Treasury 4.65%   U.S. Treasury Notes/Bonds   4.65%
AAA Private-Label CMBS 1.20%   State Housing Permanent Bonds   4.74%
Cash & Short-Term Securities 2.15%   State Housing Construction Bonds 2.76%
      Direct Construction Loans 3.45%
      Cash & Short-Term Securities 2.15%
      *Includes multifamily MBS (59.67%), MF Construction MBS (9.98%), and AAA Private-Label CMBS (1.20%).
Quality Distribution: 3    
U.S. Government or Agency 86.68%  
AAA 3.23%  
AA 4.49%  
A 0.00%  
Not Rated 3.45%  
Cash 2.15%  
             

Portfolio Duration Distribution,

by Percentage in Each Category: 3

  

Maturity Distribution

(based on average life):

Cash 2.15%   5-5.99 years 17.52%   0 – 1 year 2.24%
0-0.99 years 13.87%   6-6.99 years 5.11%   1 – 2.99 years 7.34%
1-1.99 years 3.90%   7-7.99 years 5.87%   3 – 4.99 years 18.99%
2-2.99 years 7.13%   8-8.99 years 8.22%   5 – 6.99 years 28.64%
3-3.99 years 9.19%   9-9.99 years 6.02%   7 – 9.99 years 30.51%
4-4.99 years 12.54%   Over 10 years 8.48%   10 – 19.99 years 8.70%
            Greater than 20 years 3.59%
               

 

 

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 Portfolio market value weighted by current face.

3 Based on total investments and including unfunded commitments.

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