News | New Mexico State Treasurer's Office

Since taking office in December 2006, I have strived to boost the public’s trust in the State Treasurer. The hard work has already begun to pay off—the assets of the Local Government Investment Pool (LGIP) have skyrocketed. From $800 million of assets in early 2006, the fund has reached a record $1.7 billion. That’s an enormous increase over just a year and a half for a fund that has historically seen only steady increases. We expect that balance to grow even more as potential participants hear about our success and reliability. Despite its recent success, I’m sure most people don’t know what the LGIP is.

The LGIP was started by the Office of the Treasurer in 1988 as a publicly held money-market fund. Local governments and quasi-governmental agencies can put their unused money in the fund for it to grow more than it would in a checking account. Since its inception, we have made quite a few improvements and expansions. It started as a small stand-alone pool for the Treasurer’s Office invested only in overnight repurchase agreements, but now eligible local governments and quasi-governmental agencies can participate in a much more diversified pool. Because the fund is for governmental entities, private firms, such as banks, cannot participate.

Due to the sensitivity of public money, the LGIP values safety and liquidity more than anything else. We at the State Treasurer’s Office have taken steps to expand the fund and increase its profits while also improving its reliability. This has included working with the state legislature to improve the LGIP. For instance, policy now stipulates that the LGIP portfolio can only have short-term, high rated investments. We have complied by removing the long-duration securities of the LGIP’s past, such as flex-repos. Also, the LGIP is not allowed to have an over-concentration of investments in any one kind of asset or with a single federal agency. Most importantly, the LGIP must attain one of the two highest ratings for a money market fund by a national rating agency.

In August of 2006, our office worked hard to earn the LGIP the highest investment rating from Standard and Poor’s: AAA. Since 2006, we have maintained that rating. Getting this rating provided a lot of challenges because it had previously invested in low-yielding, long-term securities. Over a six month period, under the lead of then-LGIP Bureau Chief Joelle Mevi (who is now our Chief Investment Officer and was replaced by Kirene Bargas), we transitioned to higher quality funds, with short-term maturities and reliable yield.

We just recently got a statute changed to allow tribes and pueblos to participate in the fund with greater ease. While tribes and pueblos previously had to enter into complicated Joint Powers Agreements to invest with us, now they only need a resolution from their governing body. As a result, Ramah Navajo Chapter started participating in the LGIP in April, and we expect more tribes and pueblos to join in the near future.

Since the subprime lending crisis destabilized the market, my office has been getting a lot of phone calls from concerned local government bodies about their investments. Thanks to prudent, conservative investing, the LGIP was unharmed by the subprime collapse, but we still don’t want anyone to worry. We have been happy, therefore, to provide the public with the monthly updated status of the LGIP portfolio. At May 31, 2008, the weighted average maturity of LGIP assets was 50.7 days. The year to date interest earned by the portfolio over this past year was $36,340,323, or an average yield of 4.87%. The portfolio currently is 12.5% in commercial paper, 34.7% in U.S. Agency discount notes, and 52.7% in money market funds. This data can be accessed on the Treasurer’s website, www.Stonm.org.

We are very proud of the progress the LGIP has made, but are constantly making improvements. The fund is now reviewed quarterly by an investment advisory firm and audited annually by an external audit firm in addition to reaching internal benchmarks. While the LGIP’s yield has decreased due to declining interest rates, it continues to do well in relation to similar money market funds. Additionally, we only charge for administrative fees, and are therefore able to provide one of the lowest existing fees for this service of about 5 basis points. So what are you waiting for? Give the LGIP a try.