DALLAS - J.P. Morgan Fleming Asset Management and First Southwest Asset Management Inc. say local governments are showing strong interest in the new Texas Short Term Asset Reserve, known as TexSTAR.
The local government investment pool provides participating local governments with liquidity and diversification as well as a competitive rate of interest on their invested funds. Some of the local governments already involved and pledging involvement in TexSTAR -- which currently has assets of nearly $100 million -- include cities, counties, school districts, higher education districts, and municipal utility districts.
TexSTAR invests the funds in obligations of the United States or its agencies, fully collateralized repurchase agreements that are secured by obligations of the U.S. government, and SEC-registered, triple-A rated, no-load money market mutual funds.
Standard & Poor's, the only agency approached by TexSTAR for a credit rating, has assigned its highest rating for short-term government investment pools: triple-Am.
Standard & Poor's indicates that the rating "signifies excellent safety of invested principal and a superior capacity to maintain a $1 per share net asset value at all times." The report further stated that the success enjoyed by J.P. Morgan and First Southwest while managing a similar pool in Texas gives TexSTAR more credibility than a fund managed by firms without such experience.
"This is a very well-defined, mature product -- and it really is simply the newest, most advanced, best pool in the market today," said Paul Schlosberg, chairman and chief executive officer of First Southwest Asset management. "The team of First Southwest and J.P. Morgan has the history, the knowledge, and the organization to provide the best possible support for this type of product."
Schlosberg said TexSTAR, which had its official kickoff on April 8, represents the culmination of the experience the two firms took away from a five-year stint as asset managers for the $13.1 billion TexPool, another triple-Am-rated local government investment pool.
"The statistical facts are that when we began our administration of TexPool in 1997, the fund had extremely low balances and a relatively small number of participants," Schlosberg said. "By the time we'd ended our administration of the fund, we had turned it around into one of the more respected funds in the market."
Despite their success managing the fund, the firms' request to be renewed as managers of TexPool was not successful, and Lehman Brothers and Federated Investments took over management.
"We have the benefit of familiarity," Schlosberg said. "First Southwest represents many of the participants and future participants in TexSTAR in many different capacities, including financial advisory work, underwriting, arbitrage rebate, and disclosure. Add the strength of those relationships to J.P. Morgan's incredible global accessibility and powerful organization, and you've got a combination that can't be matched by any of our competition."
According to Schlosberg, the two firms worked for months to bring the latest software and technology to the TexSTAR platform. Participants can access the system online or by telephone.
"The product incorporates the latest technology, the latest flexibility, and the latest software, but more importantly, it relies ultimately on an unmatched level of service to participants," he said.
That attention takes the burden of investment management off local finance directors, who in many cases are charged with a number of other fiduciary responsibilities.
In addition to TexSTAR and TexPool, Texas local governments can choose to invest with such pools as triple-Am-rated TexasDAILY, which is managed by Public Financial Management Inc., and the triple-Am-rated Lone Star Investment Pool Liquidity Fund, which is sponsored by the Texas Association of School Boards.
Other Texas LGIPs are the Texas LOGIC I Class A-Liquid Asset Portfolio, which is rated Aaa/MR1-plus by Moody's Investors Service, and MBIA Municipal Investors Service Corp.'s Texas Cooperative Liquid Assets Securities System, which is rated triple-A by Fitch Ratings.
