The Public Funds Investment Institute published, an "Annual Survey of Local Government Investment Pools: Modest Growth in Pool Assets, New Entrants Expand the Market," which tells us, "Local government investment pools grew modestly in 2025 with a number of new pools and assets increasing to $967 billion. The asset growth rate of 4% was less than the reported increase in state and local government investment assets, as states and municipalities also grew their separately managed investment portfolios."
They write, "Our annual survey of local government investment pools identified 180 portfolios operated by 57 pools in 43 states. It is the only comprehensive look at the LGIP industry which invests assets for thousands of public units across the country. LGIPs held $967 billion in state and local government assets at the end of last year. The total was $35 billion higher than in 2024. This was about one quarter of overall public funds investment assets."
The update tells us, "State sponsored programs dominate the LGIP ... industry with assets totaling $703 billion in 32 states. Average portfolio size was $14.9 billion in 47 portfolios. Local sponsored LGIPs are smaller, with average size of $2.0 billion, but there are many more of them, 133 portfolios in our survey."
It says, "Local-sponsored LGIP assets were $264 billion, up $21 billion over 2024 and local government money in state-sponsored pools also grew by $21 billion. Locality assets represent more than 2/3 of overall LGIP assets. Most state-sponsored portfolio assets are managed internally, but outside managers are responsible for nearly 30% of assets. All local sponsored LGIPs have external managers."
Finally, the survey says, "LGIPs compete with money market funds whose assets totaled more than $8 trillion at the end of last year. LGIPs are not subject to most Securities and Exchange Commission rules, and they operate with greater flexibility than registered funds.... Disclosure and transparency by LGIPs improved from 2024 with several now matching the disclosure/transparency required of money market mutual funds but a majority did not offer contemporary information on liquidity, portfolio risk, or asset flows."
In other news, ISDA recently published a paper titled, "Assessing Tokenized Money Market Funds as Eligible Collateral Under the ISDA CSA." It states, "Distributed ledger technology (DLT) and digital assets have matured from their early stages to solutions capable of addressing longstanding inefficiencies in collateral management. Tokenized money market funds (TMMFs) represent a particularly promising area for the application of this technology, combining the liquidity, stability and regulatory familiarity of traditional money market funds (MMFs) with the programmability and operational efficiency of digital assets. These features have driven substantial interest in the use of shares in TMMFs as collateral for financial market transactions, and notably derivatives."
ISDA continues, "The purpose of this paper is to further facilitate the potential use of TMMFs in collateral arrangements by: (i) raising awareness of the particular issues that may need to be considered when taking or posting shares in TMMFs as collateral (depending on the structure of those TMMFs); (ii) highlighting which of those issues could potentially be dealt with through standardization, including potential amendments to, or supplements of, standard-form ISDA documentation; and (iii) otherwise outlining practical approaches that market participants may use to address party-specific considerations arising from the particular operational or legal features of tokenized assets."
They explain, "The paper aims to encourage discussion with, and elicit feedback from, market participants with respect to the areas of ISDA's collateral documentation that may be amenable to standardization in future to better accommodate shares in TMMFs as collateral, as well as feedback on the appropriate timeline for implementing any standardization amendments to the ISDA collateral documentation."
ISDA writes, "While shares in traditional MMFs may be used as collateral today, this typically involves several steps: (1) redemption of shares or units in an MMF; (2) receipt by the collateral provider of cash proceeds from the redemption; (3) the collateral provider posting the cash proceeds to the collateral receiver as collateral; and (4) the collateral receiver then investing the cash proceeds in an MMF. If that collateral has to be returned, the shares or units in an MMF must be redeemed again, with the cash proceeds returned and then reinvested in an MMF by the original collateral provider. TMMFs would simplify this and facilitate direct posting of shares in an MMF as collateral. For this to occur safely and efficiently at scale, legal, operational and technological advancements must be implemented, including standardizing industry documentation for collateral arrangements to accommodate this new collateral asset."
They comment, "Tokenization broadly refers to a technological and legal process of attaching enforceable rights to entries in a DLT-based system. A TMMF in this paper is therefore an MMF with units or shares that are represented as digital tokens on a DLT-based system, with ownership recorded and transfers effected through that system.... Other than their legal structure, TMMFs generally have the same economic profile as MMFs (for example, they are generally yield-bearing)."
The paper adds, "The GDF report identifies three common TMMF structures observed in the market to date: (i) Fund Issuer Sponsored – Digital Native (the Digital Native Structure): The MMF issuer or its transfer agent uses a DLT-based system as the authoritative books and records (ie, the golden source of truth) for the purposes of recording ownership of MMF shares. (ii) Fund Issuer Sponsored – Digital Twin (the Digital Twin Structure): The MMF issuer or its transfer agent maintains off-chain books and records as the authoritative record of ownership of MMF shares and the on-chain token is used to mirror those off-chain books and records. (iii) Third-Party Sponsored – Custodial Tokenized Securities (the Custodial Structure): A bank, broker or other securities intermediary agrees to custody the MMF shares for clients, with its books and records reflecting this custodian arrangement, either maintained on DLT or updated based on DLT. The custodian/intermediary does not act as an agent on behalf of the issuer in the same manner as a transfer agent. This model is indifferent as to how ownership is recorded, whether on- or off-chain."
