The Colorado Public Funds Investment Trust, or COFIT, as of today will begin switching about $100 million in assets to FGIC Public Trust from Voyageur Asset Management.
It is the first unregistered pool to move its assets to the FGIC family of mutual funds, according to an official there. Many state-run pools are not registered with the Securities and Exchange Commission.
The fund's board made the move in an attempt to obtain greater security and disclosure in its operations through an SEC-registered investment vehicle, according to Marianne Rakowski, president of COFIT, one of the state's handful of local government investment pools.
"The board had been assessing the needs of COFIT shareholders about the need to get more safety and security in the fund," she said.
FGIC Advisors Inc., a subsidiary of Financial Guaranty Insurance Co., has been running its registered mutual funds, targeted at municipal investors, for almost two years. The funds invest exclusively in U.S. Treasury and government securities and abide by the requirements for money market funds under Rule 2(a)7.
FGIC Public Trust seemed like a good bet for COFIT's shareholders, which are all local entities, because it is a "stable money market fund," Rakowski said.
"It's important because of the disclosure of information for SEC requirements," she added.
Since the various investment scares of 1994, local government officials are more concerned about disclosure issues, she noted.
The transfer of funds from Voyageur to FGIC will start today, according to Stephen Attanasio, chief operating officer of FGIC Advisors.
The process should take about a month, according to Bill Paston, vice president and director of product development at ALPS Mutual Funds Services Inc., which administers and distributes the funds.
Meetings among the shareholders and officials at FGIC Advisors and ALPS will ensure that each municipality is aware of and approves of the fund transfer.
As part of the changeover, the preexisting COFIT board of directors will become the COFIT advisory board, Attanasio said. Under the new setup, they will not have liability for the Colorado fund.
Eventually, some members of the COFIT advisory board may be tapped to serve on the board of FGIC Public Trust, but no such plans are under way right now, Paston noted.
The abysmal cash-management results that some cities and counties have seen over recent years have "a lot of registered pools looking around," Attanasio said. Avoiding these disasters is not as much a matter of sidestepping complicated derivatives or currency risk as it is a matter of common sense, he argued.
The disclosure requirements to which FGIC Advisors must adhere are attractive for COFIT participants on this score, Attanasio said.
"It's not about knowing where the Japanese yen is," he said. "It's about correct disclosure and strong oversight. These answers are out there right now."
