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 (CD), US Treasuries, US Agencies,
repurchase agreements, and
commercial paper
Commercial paper, in the global financial market, is an Unsecured debt, unsecured promissory note with a fixed Maturity (finance), maturity of usually less than 270 days. In layperson terms, it is like an "IOU" but can be bought and sold becaus ...
.
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 (GFOA), the Association of Public Treasurers of US & Canada (APT US&C) and the
Governmental Accounting Standards Board
The Governmental Accounting Standards Board (GASB) is the source of generally accepted accounting principles (GAAP) used by state and local governments in the United States. As with most of the entities involved in creating GAAP in the United Sta ...
(GASB). Many GIPs have also acquired a rating from
Standard & Poor's
S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is co ...
, and rated GIPs follow a conservative set of guidelines set by the
rating agency.
External links
Florida Local Government Investment PoolMunicipal Fund SecuritiesCalifornia Pooled Money Investment Account (PMIA) and Local Agency Investment Fund (LAIF)
Investment funds