A government investment pool (GIP), or local government investment pool (LGIP), is a state or local government pool offered to public entities for the investment of public funds. These pools are important investments tools, offering safety with a competitive yield. GIP managers are vested with a public trust that the pool will maintain liquidity, diversity, and follow the investment pool’s guidelines. GIPs have a history of prudent management; however, there have been several isolated instances of fund losses. Despite these failures, GIPs are required to provide regularly reporting and disclosure to its participants, fund investors.
Although many GIPs are managed by government employees, there are also GIPs that are managed by outside investment firms.
Participants
Participants in a government investment pool may include state or local municipalities, counties, school districts, utility districts, and local government units. State laws or GIP rules and procedures govern the types of participants that can invest in a GIP. Multiple GIPs can be created within a single state.
Investment types
Investments may include, but are not restricted to,
certificates of deposit
A certificate of deposit (CD) is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions in the United States. CDs differ from savings accounts in that the CD has a specific, fixed term (often one, t ...
(CD), US Treasuries, US Agencies,
repurchase agreements
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two par ...
, and
commercial paper
Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of rarely more than 270 days. In layperson terms, it is like an " IOU" but can be bought and sold because its buyers and sellers have some ...
.
Regulation
Similar to any fund, a GIP follows a set of investment guidelines imposed by the board. Even though the SEC does not regulate GIPs, the pools seek to maintain safe investment strategies. Many states adopted guidelines recommended by various public associations, such as the National Association of State Treasurers (NAST), the
Government Finance Officers Association
The Government Finance Officers Association (or GFOA) is a professional association of approximately 19,000 state, provincial, and local government finance officers in the United States and Canada. GFOA is headquartered in downtown Chicago.
Name ...
(GFOA), the Association of Public Treasurers of US & Canada (APT US&C) and the
Governmental Accounting Standards Board (GASB). Many GIPs have also acquired a rating from
Standard & Poor's, and rated GIPs follow a conservative set of guidelines set by the
rating agency
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may ra ...
.
External links
Florida Local Government Investment PoolMunicipal Fund SecuritiesCalifornia Pooled Money Investment Account (PMIA) and Local Agency Investment Fund (LAIF)
Investment funds