What Options Are Available For State Investments?
If you are considering investing in stocks or bonds, you may be wondering what options are available. A State Investment Fund is a short-term investment pool for State departments, agencies, and certain public institutions. By investing through this fund, state agencies and departments can diversify their investments and benefit from their returns. These funds can have a range of investment options, ranging from short-term investments to long-term investment opportunities. Listed below are a few of the options available to you.
Public Treasurers’ Investment Fund
The Public Treasurers’ Investment Fund (PTIF) is the government-sponsored money market fund for Utah County. Its investments currently earn 3.02 percent interest, which is slightly higher than the national average. Considering the interest rate increases by the Federal Reserve, the yield is expected to increase to 3.2 percent in June and 3.5 percent in July. A list of approved security broker/dealers and investment advisors is maintained by the City Treasurer.
The primary objectives of the Public Treasurers’ Investment Fund are maximum security of principal and capital, and preservation of liquidity. The second objective is to provide adequate liquidity, which is necessary for continued portfolio management. The third objective is to obtain a market rate of return over the course of the budget cycle, within the risk parameters established by the Investment Policy. These objectives are necessary to meet the State Treasurer’s cash flow needs and satisfy the policy.
Unlike bank savings accounts, PTIF funds are not FDIC-insured, and they may lose value. The primary objective of the PTIF is to provide safe investment opportunities. Although PTIF is not FDIC-insured, it is still an excellent investment vehicle for state and local government entities. The fund is one of the best choices for investing public funds. And since the money is not held for other purposes, the investment portfolio is designed for the long-term.
Local Government Investment Pool
The Local Government Investment Pool is an alternative investment program for local governments, run by the Treasurer of the State of Washington. Its primary objectives are safety, liquidity, and a competitive return on investment. The funds invested by LGIPs are commingled with State investments to achieve economies of scale and ample liquidity for all pool participants. GFOA recommends that local governments carefully review investment policies and procedures of participating LGIPs to ensure they meet their objectives and protect investors.
LGIPs are governed by a board of trustees, typically comprised of public officials. While these investment vehicles operate like money market mutual funds, they are not registered with the Securities and Exchange Commission. As a result, they are exempt from SEC regulation. Additionally, they fall under a governmental exclusion clause, which reduces investor protection. Investments in LGIPs are not guaranteed or insured, and substantial losses have occurred in the past.
Georgia’s government investment pool, or Georgia Fund 1, is one example of a local government investment pool. This fund consists of local and state government funds and is managed to maintain a constant net asset value of $1.00. The fund is also AAAf-rated, and employs both internal and external investment managers. The primary investment objective of the Georgia Fund 1 is to increase the value of local government bonds by reducing market risk. In addition to this, investors should consider how long their funds are expected to last.
The GFOA recommends using a prototype master repurchase agreement, which is designed for state investment projects and undergoing appropriate legal and technical review. Repurchase agreements generally involve purchasing U.S. Treasury bonds, and they serve as money-market instruments. They operate like short-term loans between the buyer and seller, with the securities being purchased serving as collateral. Because repurchase agreements are relatively safe investments, they are generally considered to meet the goals of secured funding and liquidity.
The risks involved in a repurchase agreement are similar to those of any other security lending transaction. Since repurchase agreements do not assess financial strength, they involve risks of depreciation and default. If the securities under the repurchase agreement depreciate in value, the lender may lose money. The lender may also lose money if the securities are sold at a lower price than what they initially paid. The lender may have to incur additional expenses, including margin payments.
Repurchase agreements are common for governmental entities, and should be carefully considered. In addition to addressing risk factors, government entities should exercise special caution in selecting counterparties. They should also evaluate the creditworthiness of each counterparty and identify the principals in transactions. Finally, master repurchase agreements should be subject to appropriate legal and technical review. In addition, the SIFMA prototype agreement should contain appropriate supplemental provisions. The GFOA recommends adopting policies for repos as they apply to their own investments.