News | New Mexico State Treasurer's Office

ANNOUNCEMENT

Recent news headlines concerning downgrades and defaults in the LGIPs of various States and Counties has caused concern among some investors that other LGIP’s, such as New Mexico’s, may contain similar risks. As one of our most significant investor groups, the State Treasurer’s Office wants to assure you that the New MexiGROW LGIP is not invested in any type of sub-prime investment or any type of mortgage security, SIV (structured investment vehicle), CDO (collateralized debt obligation) or CLO (collateralized loan obligation). It is these types of securities that are currently causing the defaults and losses being experienced by some publicly managed funds.

The New MexiGROW LGIP is rated ‘AAAm’ by Standard & Poor’s and, as a requirement of maintaining the rating and proving compliance to the rating criteria, must submit a detailed weekly portfolio inventory report for their review and analysis. The New MexiGROW LGIP is assigned a ‘principal stability fund rating’ (PSFR) to signify that the pool seeks to provide a stable net asset value (NAV) of $1.00 per share and that investment management guidelines are consistent with that objective. The ‘AAAm’ rating further signifies an extremely strong capacity to maintain principal stability and to limit exposure to principal losses due to credit, market, and/or liquidity risks. Investment management is mandated by the State Treasurer’s Investment Policy and NM State Statute, specifically section 6-10-10 NMSA 1978. Safety of capital is the primary objective of all Treasury investments. Additionally, the New Mexico State Board of Finance provides oversight for the pool portfolio as well as all other funds under management of the Treasurer’s Office.

As of November 30, 2007 the LGIP portfolio consisted of AAA rated Prime Institutional Money Market funds (68%), U.S. Agency discount notes (18%), A-1+/P1/F1+ rated commercial paper (16%), and a fraction of a percent in an interest-bearing bank account. A-1+/P1/F1+ represents a rating of the highest credit quality by all three rating agencies: S&P, Moody’s, and Fitch. The weighted average maturity (WAM) of the portfolio was 19 days and the yield of the pool was 4.89% on November 30th.

Again, participants can rest assured knowing the New MexiGROW LGIP holds no investments in any sub-prime or mortgage investment and no investments in SIVs, CDOs, or CLOs.