Fitch Says LGIPs Grow to $559B
Fitch Ratings published Local Government Investment Pools: 1Q23," which tells us, "Fitch Ratings' two local government investment pool (LGIP) indices experienced an aggregate asset increase in the first quarter of 2023 (1Q23). Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-Term LGIP Index were $559 billion at the end of 1Q23, representing increases of $28 billion qoq and $94 billion yoy. The Fitch Liquidity LGIP Index was up 9% qoq and the Fitch Short-Term LGIP Index was down 0.7% qoq, compared to average growth of 4.4% and -0.8%, respectively, in the first quarter over the past three years. The outsized increase in 1Q23 relative to historical first quarter growth for the Fitch Liquidity LGIP Index may have been influenced by the March banking volatility." They explain, "Weighted average maturities (WAMs) remained stable in 1Q23 as the Fed slowed the pace of rate hikes. The WAM of the Fitch Liquidity LGIP Index remained at 27 days, still higher than '2a-7' money market funds at 20 days. The Fitch Short-Term LGIP Index ended the quarter with a duration of 1.14 years, up 18% since last quarter. Both Fitch indices ended 1Q23 with improved average yield profiles, responding quickly to Fed rate hikes with average net yields of 4.77% for the Liquidity Index and 3.72% for the Short-Term Index." Fitch adds, "The Fitch Liquidity LGIP Index increased exposure to CP by 3.9% and decreased exposure to CDs by -2.7%. Exposure to treasuries, agencies and repo cumulatively increased by 1%. This aligns with investor behavior during the March banking volatility, where individuals diversified into U.S. government and nonbank credit exposures. Competitive repo rates continued to present managers with more attractive opportunities." (Note: We feature a session entitled, "Local Government Investment Pools & SMAs at next week's Money Fund Symposium in Atlanta, Ga., June 21-23, 2023.)
