LGIPs growing steadily | Bond Buyer

“While pools appeal to smaller and mid-sized entities, states and large municipalities maintain separate portfolios and these experienced a higher rate of growth,” said Marty Margolis, founder of the Public Funds Investment Institute.

There are now 57 local government investment pools managing $967 billion in assets, a growth of 4% in value as compared to 2024.

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“This is a vibrant industry with several new entrants last year, though the growth rate of LGIP assets was less than the increase in overall state and local government investment assets,” said Marty Margolis, founder of the Public Funds Investment Institute.

The PFII is an independent nonprofit organization that tracks LGIPs and publishes an annual summary of what’s happening in the market.

LGIPs are pooled investment funds established by states, counties, or joint powers authorities that function similar to a money market mutual fund for governmental entities.

LGIPS are not regulated by the Securities and Exchange Commission, which reduces transparency and raises risk for investors. The flexibility of the funds appeals to a wide range of interests and government agencies.

“While pools appeal to smaller and mid-sized entities, states and large municipalities maintain separate portfolios and these experienced a higher rate of growth,” said Margolis.

State treasurers remain a key sponsor of LGIPs, with assets totaling $703 billion in 32 states. The average portfolio size was $14.9 billion in 47 state-sponsored portfolios.

Locally sponsored LGIPs fueled most of the growth in 2025 with assets of $264 billion, up $21 billion as compared to 2024. Local governments also kicked in an increase of $21 billion into state funds.

Nearly all the LGIP assets are dedicated to stable value portfolios which tend to favor low risk securities that maintain constant net asset value.

Local-sponsored pools are put a new emphasis on fixed rate fixed term portfolios, but they represent a small fraction of overall pool assets.

Expense ratios for LGIPs were higher in 2025 than in 2024, averaging 12.9 basis points, as compared to 12.2 basis points in 2024. State-sponsored pools had lower expense ratios.

Local sponsored pool expense ratios were appreciably higher than the state’s averaging 19.8 basis points.

LGIP disclosure and transparency improved from 2024 with several pools matching the disclosure/transparency requirements of money market mutual funds.

The survey found that a majority of pools lacked contemporary information on liquidity, portfolio risk, and asset flows.

S&P Global Ratings has been rating LGIPs since 1992 and breaks the ratings into three categories depending on the pool’s investment objective.

Principal Stability Fund Ratings are forward-looking opinions about the ability of a LGIP to maintain stable principal and limit exposure to principal losses due to credit risk.

Credit Quality Ratings address the overall credit quality of a fixed-income investment fund and are derived from historical default and transition studies.

Fund Volatility Ratings are forward-looking opinions about a fixed-income investment fund’s volatility of returns relative to that of a reference index denominated in the base currency of the fund.

S&P individually profiles nearly 100 LGIPs sponsored by states, counties, schools, and local government cooperatives.

Asset classes include asset-backed securities, bank deposits, commercial paper, money market funds, municipal debt, Treasury notes, and repurchase agreements.