Who are the typical investors in a local government investment pool?

Local government investment pools (LGIPs) are designed primarily for the investment needs of municipal governments and their agencies. These pools allow local governments to collectively invest their funds in a variety of fixed-income investments while benefiting from economies of scale, lower transaction costs, and increased diversification.

Municipal governments typically participate in these investment pools to manage their cash reserves, ensure the liquidity of their funds, and earn interest on idle cash, all while adhering to regulations governing their investment activities. This makes them the most relevant and typical investors in LGIPs.

Other types of investors such as federal government agencies or aggressive investors do not usually participate in LGIPs, as these entities have different investment goals, risk tolerances, and regulatory frameworks that guide their investment decisions. Income investors, while they may have an interest in stable returns, generally consider investment vehicles that specifically align with their strategy, which may not include the liquidity needs and collective investment priorities characteristic of local government pools.