AFL-CIO HOUSING INVESTMENT TRUST

Portfolio Performance Commentary:

October 2017

For the month of October 2017, the AFL-CIO Housing Investment Trust (HIT) had a gross return of -0.01% and a net return of -0.04%. Its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (Barclays Aggregate), reported a return of 0.06% for the month.

October gross relative performance: -0.07%

Performance for periods ended October 31, 2017 (Returns for periods exceeding one year are annualized)
		YTD	1 Year	3 Year	5 Year	10 Year
	HIT Total Gross Rate of Return	3.22%	0.98%	2.71%	2.35%	4.58%
	HIT Total Net Rate of Return	2.88%	0.58%	2.29%	1.92%	4.13%
	Barclays Capital Aggregate Bond Index	3.20%	0.90%	2.40%	2.04%	4.19%
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 agency multifamily mortgage-backed securities (MBS) in the HIT’s portfolio as spreads to Treasuries tightened for most products. Ginnie Mae construction/permanent loan certificates contracted by approximately 1 basis point (bp) and permanent loan certificates were relatively flat. The benchmark Fannie Mae 10/9.5 DUS structure tightened by approximately 3 bps. The HIT had 26.3% of its portfolio invested in single-asset DUS securities of various structures at the end of October, while there were no such securities in the Barclays Aggregate.
• The portfolio’s slightly short relative duration as Treasury rates rose across the curve. The 2-, 5-, 7-, 10-, and 30-year rates increased by 12, 8, 6, 5, and 2 bps, respectively.

Negative impacts to the HIT’s performance included:

• Performance by corporate bonds, the best performing major sector in the Barclays Aggregate, posting an excess return of 52 bps. The HIT does not invest in corporate bonds, whereas the sector comprised 25.7% of the index as of October 31, 2017.

• Performance by agency fixed-rate single family mortgage-backed securities (RMBS), the second best performing major sector in the index with excess returns of 4 bps. The HIT was underweight to this sector with an 18.0% allocation versus 28.0% in the Barclays Aggregate at the end of October.

• 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

1 

AFL-CIO HOUSING INVESTMENT TRUST October 2017 Performance Commentary

BBB) of the Barclays Aggregate. Those returns were 4, 35, 50, and 52 bps, respectively. Approximately 96% of the HIT portfolio had a rating of AAA or carried a government or government-sponsored enterprise guarantee, compared to approximately 71% for the Barclays Aggregate at October 31.

October 2017 Bond Sector Performance

Sector	Absolute Return	Excess Return (bps)	Modified Adjusted Duration
U.S. Treasuries	-0.12%	0	6.16
Agencies	-0.04%	5	4.31
Single family agency MBS (RMBS)	-0.03%	4	4.50
Corporates	0.40%	52	7.51
Commercial MBS (CMBS)	0.39%	54	5.44
Asset-backed securities (ABS)	0.06%	13	2.19
Source: Bloomberg L.P.

Change in Treasury Yields

Maturity	09/30/17	10/31/17	Change
1 Month	0.933%	0.971%	0.038%
3 Month	1.041%	1.131%	0.091%
6 Month	1.185%	1.278%	0.093%
1 Year	1.289%	1.421%	0.132%
2 Year	1.483%	1.600%	0.117%
3 Year	1.622%	1.726%	0.103%
5 Year	1.936%	2.017%	0.081%
7 Year	2.169%	2.231%	0.062%
10 Year	2.334%	2.379%	0.046%
30 Year	2.860%	2.879%	0.019%
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 October 2017 Performance Commentary

Portfolio Data as of October 31, 2017

Net Assets	$6,155,352,091
Portfolio Effective Duration	5.527 years
Portfolio Average Coupon	3.21%
Portfolio Current Yield1	3.23%
Portfolio Yield to Worst	2.79%
Convexity	0.084
Maturity	9.749 years
Average Price	102.39
Number of Holdings	999

Portfolio Percentage in Each of the Following Categories:²

Agency Single-Family MBS	21.94%
CMBS – Agency Multifamily*	64.01%
U.S. Treasury Notes/Bonds	4.00%
State Housing Permanent Bonds	5.08%
State Housing Construction Bonds	0.82%
Direct Construction Loan	0.09%
Cash & Short-Term Securities	4.06%
* Includes multifamily MBS (55.17%), multifamily Construction MBS (6.93%), and AAA Private-Label CMBS (1.91%).

Portfolio Duration Distribution, by Percentage in Each Category:²

Cash	4.06%
0-0.99 years	5.99%
1-2.99 years	13.66%
3-3.99 years	17.40%
4-5.99 years	18.40%
6-7.99 years	22.35%
8-9.99 years	13.01%
10-14.99 years	2.59%
15-19.99 years	2.08%
Over 20 years	0.44%

___________________________

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 Percentages weighted by unfunded construction-related security purchase commitments.

3 

AFL-CIO HOUSING INVESTMENT TRUST October 2017 Performance Commentary

Portfolio Data (continued)

Maturity Distribution (based on average life):

0 – 1 year	4.09%
1 – 2.99 years	9.14%
3 – 4.99 years	27.84%
5 – 6.99 years	20.98%
7 – 9.99 years	25.42%
10 – 19.99 years	9.11%
Greater than 20 years	3.42%

Quality Distribution:³

U.S. Government or Agency	89.41%
AAA	2.67%
AA	3.77%
A	0.00%
Not Rated	0.09%
Cash	4.06%

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 Percentages weighted by unfunded construction-related security purchase commitments.

4