497 1 aflcio_497.htm AFL-CIO PORTFOLIO PERFORMANCE COMMENTARY: FEBRUARY 2016


AFL-CIO HOUSING INVESTMENT TRUST
Portfolio Performance Commentary:
February 2016
For the month of February 2016, the AFL-CIO Housing Investment Trust (HIT) had a gross return of 0.46% and a net return of 0.43%.  Its benchmark, the Barclays Capital Aggregate Bond Index (Barclays Aggregate), reported a return of 0.71% for the month.
February gross relative performance: -0.25%
Performance for periods ended February 29, 2016
(Returns for periods exceeding one year are annualized)
 
   
YTD
  
1 Year
  
3 Year
  
5 Year
  
10 Year
  
 
HIT Total Gross Rate of Return
2.20%
  
2.61%
  
2.73%
  
4.08%
  
5.20%
  
 
HIT Total Net Rate of Return
2.13%
  
2.18%
  
2.29%
  
3.63%
  
4.75%
  
 
Barclays Capital Aggregate Bond Index
2.10%
  
1.50%
  
2.22%
  
3.60%
  
4.70%
  
                       
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 included:
·
The HIT's ongoing yield advantage over the Barclays Aggregate.
·
Poor performance by corporate bonds, the worst performing major sector in the Barclays Aggregate, with excess returns of -31 basis points (bps).  The HIT does not invest in corporate bonds, whereas the sector comprised 24.2% of the index as of February 29, 2016.
·
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 -5, -20, -30, and -30 bps, respectively.  The HIT has an overweight with respect to the index in high credit quality investments. Over 95% of the HIT portfolio had a AAA profile or carried a government or government-sponsored enterprise guarantee compared to 72% for the Barclays Aggregate at the end of January.
·
Weak performance by agency single family mortgage-backed securities (RMBS), the second worst performing major sector in the index with excess returns of -14 bps.  The HIT is underweight to this sector with a 22.2% allocation versus 28.5% in the Barclays Aggregate.

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AFL-CIO HOUSING INVESTMENT TRUST                                                                 February 2016 Performance Commentary

Negative contributions to the HIT's performance included:
·
Weak performance by agency multifamily mortgage-backed securities as spreads to Treasuries widened. Spreads widened by 26 and 39 bp, respectively, on FHA/Ginnie Mae multifamily permanent loan and construction/permanent loan certificates. Fannie Mae multifamily DUS spreads widened across most structures, but to a lesser extent. The spread on the benchmark Fannie Mae 10/9.5 increased by approximately 1 bp. The HIT had 20.4% invested in DUS securities of various structures at the end of February.
·
The portfolio's relative short duration to the Barclays Aggregate as interest rates fell across the curve beyond two years.  Five-, 10-, and 30-year Treasury rates declined by 12, 19, and 13 bps, respectively.  Countering this to some extent was the portfolio's overweight to spread products, as swap spreads to Treasuries tightened. Two-, 5-, and 10-year swap spreads tightened by 1, 4, and 4 bps, respectively.

February 2016 Sector Performance
Sector
Absolute
Return
Excess Return
(bps)
Modified Adjusted
Duration
U.S. Treasuries
0.89%
0
6.14
Agencies
0.59%
5
3.99
Single family agency MBS (RMBS)
0.37%
-14
3.07
Corporates
0.81%
-31
7.12
Commercial MBS (CMBS)
0.81%
5
5.09
Asset-backed securities (ABS)
0.21%
0
2.33
Source: Bloomberg L.P.
Change in Treasury Yields   
   Maturity
01/31/16
2/29/16
Change
1 Month
0.221%
0.221%
0.000%
3 Month
0.313%
0.318%
0.005%
6 Month
0.428%
0.471%
0.043%
1 Year
0.451%
0.600%
0.148%
2 Year
0.776%
0.776%
0.000%
3 Year
0.968%
0.893%
-0.074%
5 Year
1.329%
1.213%
-0.116%
7 Year
1.668%
1.518%
-0.150%
10 Year
1.922%
1.736%
-0.186%
30 Year
2.744%
2.616%
-0.128%
                      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.
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.
 
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