Series 7: 3.2.5.1. Local Government Investment Pools

Taken from our Series 7 Online Guide

3.2.5.1. Local Government Investment Pools

Local government investment pools (LGIPs) are trusts established by state and local governments that offer municipal entities a place to invest their money. Government entities use their surplus cash to purchase interests in a trust, which invests the assets in a large portfolio of securities according to the trust’s investment objectives and state laws. Only municipal governments and their instrumentalities may invest in these trusts. LGIPs are not open to investment by the public.

The purpose of LGIPs is to encourage the efficient management of the cash reserves of government entities that otherwise have limited investment options. LGIPs offer an investment that minimizes the risk of principal loss while offering daily liquidity and a competitive rate of return. By pooling their funds, government participants benefit from economies of scale, diversification, professional portfolio management, and liquidity.

Example: The state of Virginia offers public entities of Virginia the opportunity to participate in a professionally managed, AAA-rated LGIP. Under the Virginia statutes, the LGIP offers a competitive return with minimal risk of principal loss. The LGIP also offers liquidity and the benefits of large-scale institutional investment management.

LGIPs generally are formed to meet a specific investment objective. In most cases, LGIPs invest to protect the investors’ principal and provide them with cash liquidity. These pools invest in short-term securities to avoid credit, liq

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