PFII Reviews Texas LGIPs, New Meeder
The Public Funds Investment Institute (PFII) published a brief titled, "Is Texas a Model of a Public Funds Investor-Friendly Market." It explains, "Texas could be the model for an investor-friendly public funds investment market, with a robust state-sponsored local government investment pool and a number of sizable alternatives that provide public funds investors competitive choices, low fees, risk guardrails and significant disclosure requirements.... Texas has seven local government investment pools that offer a total of 14 portfolios, including government, prime and fixed rate options. LGIP assets total about $115 billion. The state-sponsored Texpool program sets a high standard, with state oversight, an outside manager who is a major sponsor of money market funds, very low expenses and a high level of disclosure/transparency. It has nearly $50 billion of assets in a government and a prime portfolio. Two other programs have assets of more than $20 billion each, and performance histories that go back to 1987 and 1996. Each is sponsored by one or more statewide associations who receive sponsorship fees." The update continues, "While this might seem like a well-served market, Meeder Public Funds, which manages LGIPs in two states with $1.85 billion of assets, has jumped in with a new offering, Texas-Connect.... Texas is the second most populous state, and with 5,500 local governments also ranks second in the number of public units. This makes for fertile ground for LGIPs, whose purpose is to pool funds from multiple governments for investment purposes. Texpool, the state-sponsored LGIP, sets a strong standard. It was organized in 1989 and it was managed by the Texas State Treasury until there was a run on the fund in 1994 precipitated by a sharp rise in short term interest rates and a maturity structure that did not permit it to keep up with short term yields. (Another victim was the Orange County, California investment pool that led to the county declaring bankruptcy.)" The update adds, "[C]ompetition is strong, with a number of competing pools. Three alternatives, Lonestar, sponsored by the Texas Association of School Boards, Texas CLASS, managed by Public Trust Advisors, and TexSTAR, managed by JP Morgan and marketed by Hilltop Securities have total assets of about $60 billion.... Yet a well-developed market does not seem to have deterred a new entrant. Texas-Connect received a rating from S&P Global in May and is likely to commence operating soon.... Texpool is controlled by the Texas Comptroller of Public Accounts. Texas-Connect has both an advisory board and a board of trustees. The board of trustees is responsible for managing and administering the trust. It consists of an officer of Meeder, a retired treasurer of the Columbus Ohio City Schools and the executive director of an Illinois LGIP."
