A new research report by the Public Funds Investment Institute details the role of state treasurer-sponsored local government investment pools as a foundation of the $900 billion industry that provides money market-like investments to state and local governments. State treasurers in 32 states offer these funds and their assets total nearly $700 billion. Local-sponsored LGIPs with an estimated $200 billion of assets supplement these state programs.
1. Thirty-two states offer these pools with the vast majority modeled after money market mutual funds offering daily liquidity and a stable net asset value.
2. States offer government-oriented portfolios that closely resemble institutional government money market funds and prime portfolios that resemble institutional prime funds. Because LGIPs are not subject to the Securities and Exchange Commission’s money fund rules the prime LGIPs are able to offer a stable net asset value and are not required to charge liquidity fees.
3. Most assets in the state-sponsored LGIPs are managed internally by state treasurer staff, but about 26% of assets are managed by outside investment managers.
4. Fees and expenses of these funds are, on average, much lower than fees and expenses of institutional money market funds. They average about a quarter of the fees charged by institutional government money market funds.
5. Transparency and disclosure for the state-sponsored LGIPs varies tremendously, with some closely tracking the requirements for SEC-registered money market funds while others provide less disclosure.
