Texas Rising - Fall 2011

TexPool Takes a Careful Approach

by David Bloom

Paul Ballard, CEO and Chief Investment Officer
Texas Treasury Safekeeping Trust Company

Paul Ballard, CEO and Chief Investment Officer of the Texas Treasury Safekeeping Trust Company, is one SLY guy when it comes to money.

To Ballard, SLY isn’t about cunning ways; it’s the acronym that defines TexPool’s conservative approach to protecting and growing financial resources.

“It’s all about safety (S) of principal, liquidity (L) and yield (Y),” Ballard says. “So our focus is, first and foremost, not to lose money. Further, we want it to be readily accessible when pool participants need it, and, finally, local governments expect to see a return that expands their coffers.”

TexPool was created by the Texas Legislature in 1989 to give local government entities access to a state-sponsored investment fund. In its first year of operation, 209 local entities invested. The fund’s average annual balance was $587 million and it paid out $47.7 million. Today, with more than $15 billion in assets, TexPool is the largest government investment pool in Texas. The Comptroller’s office, which oversees TexPool, delegates authority for its management to its subsidiary operation, the Texas Treasury Safekeeping Trust Company. Federated Investors administers the program, handling investment management, marketing and an array of client services.

TexPool invests exclusively in U.S. government securities, repurchase agreements backed by U.S. government securities and AAA-rated money market mutual funds. For local governments that have the legal authority to put their money into commercial paper and certificates of deposit, there’s a separate pool called TexPool Prime. Both are rated AAAm by Standard & Poor’s. This, the highest rating a state government investment pool can earn, is essentially a seal of approval of the SLY approach.

More than 2,200 government entities participate in TexPool, while nearly 130 have opted for TexPool Prime. The benefits that TexPool brings to the investment marketplace extend to entities that don’t participate in the fund, because its low fee structure helps drive down the costs throughout the sector.

“As someone who has the responsibility for our county’s finances, I can’t just put our money out there and hope for the best,” says Vivian Wood, Williamson County treasurer and a member of the TexPool Advisory Board. “I want to know exactly what our investments are and the terms of those deals. TexPool’s transparency gives me that.”

And when financial rumblings across the world may have implications for the safety and soundness of TexPool’s investments, Wood is glad to have TTSTC and Federated watching out for Williamson County’s taxpayers.

“There’s no one in Greece I can call,” she says. “But when I call TexPool, someone always gets back to me right away with detailed answers to my questions.”

Participants in TexPool also have access to a variety of online training through the online TexPool Academy. The Web-based curriculum allows finance professionals in local government to complete required training under the Texas Public Funds Investment Act in a cost-efficient way. Since 2009, the TexPool Academy has delivered 720 courses to nearly 150 government entities. TR

TexPool at a Glance

Portfolio Overviews as of 9/30/11

Pool Assets $14.05 billion
Portfolio Composition:

  • 54.7% repurchase agreements
  • 43.0% Agencies
  • 2.3% Treasuries

TexPool launched in 1989 attracting investments from 209 local entities. The fund’s average annual balance was $587 million and it paid out $47.7 million. In 2011, 2,200 government entities participate in TexPool with total assets of $14.05 billion. TexPool Prime has almost 130 investors and $1.1 billion in assets.

More about the State of Texas investments and annual Treasury reports »