2024 LGIP Survey: LGIPs Hold Nearly $1 Trillion of Public Funds
Our annual survey of local government investment pools is out. This year we expanded our survey to include local sponsored LGIPs. In total we identified 161 portfolios. They operate in all but seven states. The survey is the only comprehensive look at the LGIP industry which invests assets for thousands of public units across the […]
Halftime: The Score for Public Funds Investments as of June 30
The first half of 2025 has been kind to public funds investors, delivering solid returns on short-term cash and historically high returns on longer-duration separate accounts. LGIP returns, while somewhat lower than in 2024, were close to generation highs, benefitting from the fact that the Federal Reserve has maintained an elevated federal funds rate. Individual […]
Why Do Investors Discount Credit Risk?
The markets are awash in headlines about economic uncertainty and the rising prospect of recession, but these forces have barely moved measures of credit risk. Credit backed instruments are a significant part of public funds portfolios. The Federal Reserve estimates that state and local governments held $561 billion of commercial paper and corporate bonds at […]
Welcome to 2025, the Year of Heightened Uncertainty
A new year often brings uncertainty but for public funds investors the start of 2025 stands out. On top of the usual questions about financial market trends a couple of things amplify ambiguity. While all investors are subject to these forces, public sector investors are particularly vulnerable. States and localities count on Washington for about […]
A Good Year for Public Funds Investors
It’s been a good year for public funds investors. You can access indices and other current information on the Investment Dashboard here. Meanwhile, reflect on this question: Are interest rates higher or lower than a year ago? As economists are wont to say, “It depends.” Short-term yields are significantly lower. The Federal Reserve’s policy […]
Waiting for the Fed
Next week’s meeting of the Federal Open Market Committee will set the tone for the markets for the next several months. In one sense it may be a non-event: investors have coalesced around the view that the central bank will cut the main policy rate by 25 basis points to 4.25-4.50%. This would push government-oriented […]
Research Note: Commercial Paper Market Should be More Resilient After Money Fund Reforms
Commercial paper is a core holding of many state and local government investment portfolios. It provides a yield boost to separately managed portfolios and prime-based local government investment pools. The commercial paper market is a bit finicky: If you are a buyer there is little flex: you generally receive the rate posted by issuers. If […]
Uncertain Times: Liquidity May Be More Valuable Now than Ever
Investment managers often talk about the cost of excess liquidity. But liquidity may also have value. The value can be realized as ready cash to make up for unplanned shortfalls in revenue or acceleration in spending , or to take advantage of a rise in interest rates that increases earnings potential from re-investments. Liquidity management […]
Hole in the Bucket? State and Local Government Portfolio Growth Slows and May be Pressured by Rate Declines
If you are managing (or overseeing) public funds these days, you might feel as if you are tending a bucket with a hole in it. With interest rates at their highest level in decades earnings are flowing into portfolios at a strong rate. But Federal Reserve data show asset growth recently has slowed. The reason? […]
Changing Local Government Investment Pool Managers: Replace the Manager or Create a New LGIP?
This LGIP Just Changed Managers. LGIPs rarely change managers. Sure, when a manager is sold this is viewed as a change under Federal law and triggers client approval, but the sale is usually described as “new owner, same dedicated employees.” Advisory agreements are normally renewed when they expire, perhaps with the board undertaking some diligence […]