LGIP Education Series
To help public finance professionals stay informed, Chandler has developed this series of educational white papers covering topics that matter most to local government investment pool participants. From cash flow management and liquidity strategies to investment policy development, public fund regulations, and evolving market conditions, these resources provide practical insights for finance officers, treasurers, and public agency decision-makers. Our goal is to provide timely, actionable guidance that supports sound investment decisions and strengthens your organization’s financial stewardship. As a trusted provider of financial services and fixed income management solutions, Chandler is committed to sharing the expertise public agencies need to confidently navigate today’s investment landscape.
Managing an LGIP Through Market Volatility
Market volatility can present a range of challenges for Local Government Investment Pools (LGIPs), including liquidity pressures, credit concerns, interest rate changes, and investor redemptions. This paper discusses key risk management strategies, stress testing, and lessons learned from past market disruptions to help LGIPs maintain liquidity, protect NAV stability, and support investor confidence.
Asset Backed Commercial Paper
Commercial paper is a foundational short-term financing instrument used by corporations, financial institutions, and structured-finance vehicles. In institutional cash portfolios, commercial paper often serves as a credit allocation that can diversify government-only exposures and modestly enhance yield. Asset backed commercial paper (ABCP) is a specific subset of the market that introduces securitization features into the commercial paper format.
Federal Reserve Policy & LGIP Yields
Local Government Investment Pools (LGIPs) sit at the intersection of public-sector liquidity management, short-term fixed income markets, and the Federal Reserve’s monetary policy. The Federal Open Market Committee (FOMC) is the monetary policy committee of the Federal Reserve that sets interest rates. Because LGIPs generally have a short maturity structure, the FOMC’s policy directives materially impact pool yields.
Commercial Paper Overview
Commercial paper (CP) is a high-quality, short-term credit instrument used in money market funds and local government investment pools (LGIP) to enhance portfolio yield, maintain liquidity and diversify holdings. This paper provides an overview of the commercial paper market, examines the different types of commercial paper and describes the role it plays in the portfolio structure of an LGIP.
GASB 79: Origin and Purpose
Understanding Repurchase Agreements
Local government investment pools (LGIPs) are one of the most common investment products utilized by state and local governments nationwide. Because public funds must be protected while remaining liquid, LGIPs typically invest in low-risk, short-term instruments. One of the most common investments utilized in LGIPs are repurchase agreements, or “repo(s).” Repos are widely used in money market funds and LGIPs because they support the key investment objectives: safety, liquidity, and yield.
Additionally, repos allow investment managers to maintain flexibility in managing the pool’s cash flows. Because local government participants may deposit or withdraw funds frequently, LGIP managers must ensure that the portfolio contains enough short-term investments to meet these needs. For LGIPs that follow the rules of GASB 79, 10% of the assets must have maturity of one day and 30% must mature in seven days or less. As a result, repos serve as a core investment to meet short-term liquidity needs.