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 […]
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 […]
Research Note: Why Some investors May Choose an LGIP in a Declining Interest Rate Market
Cash has been king for the past three years as rising interest rates boosted LGIP and money fund returns and depressed returns on longer duration investments like short term Treasury notes. Now that the Federal Reserve has shifted its policy to reducing rates there is a view that keeping large cash balances in an LGIP […]
How Far/How Fast: The Path for Pool Yields is Lower
The Federal Reserve is on the cusp of cutting rates. That much is crystal clear. When it does—most likely starting at its meeting September 18-–the yields on LGIPs and money funds will decline as well. How far and how fast will they fall? Here is a perspective on that question: LGIP and money fund yields […]
Why [Some] Investors Seem to Ignore The likelihood of Lower Rates Ahead
The path ahead for interest rates seems clear: the Federal Reserve will soon begin to reduce its policy rate, bringing down short-term rates generally. This has been the outlook for a couple of months, with only the timing and magnitude of cuts in question. Meanwhile money market fund assets grew steadily this year and are […]
What the Big Bond Market Rally Means for Public Funds Investors
Last week’s big decline in interest rates feels a lot more real than the similar move at the beginning of the year. If so, what does it mean for public funds investors? The rally in bond prices boosted the returns on our 1–3-year model portfolio ahead of cash returns for the first time in several […]
New Research Report Details the Role of State-Sponsored Local Government Investment Pools as the Foundation of a $900 Billion Industry
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 […]
First Quarter Investment Returns: Cash Led the Way Again
• Local government investment pools and money funds once again produced market-leading returns in the 2024 first quarter. The beat by cash-type investments followed the strong showing for cash-type investments in 2023. • Returns of longer-duration portfolios were dragged down by a modest rise in interest rates. • The yield curve also worked against longer-duration […]