Lone Star Investment Pool Celebrates Three Decades of Success

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The Lone Star Investment Pool is celebrating 30 years of success this year with a look back at key moments in the Pool’s history. They are also preparing for the future with a website redesign to better serve participants.

"Our goal over the past 30 years has been to assist local governments, including school districts, with the important work of managing public funds,” said Bill Mastrodicasa, managing director of First Public, which administers the Pool. “We wouldn’t be here today celebrating this milestone anniversary without the support of our participants and their boards. We’re grateful for their commitment and trust.”

Safety, liquidity, and yield

The Pool was established on Sept. 18, 1991, when the Houston Independent School District (HISD) became the first public entity to officially invest. The goal of the Pool was to help public entities manage funds by providing security of principal, liquidity, and the highest possible rate of return — objectives that still guide the Pool. The Pool has grown to serve more than 650 school districts and local governments in Texas, with an average of more than $14.6 billion in annual assets, including continuous growth during the last decade.

An investment pool like Lone Star can purchase securities in large denominations, thereby improving yields and reducing transaction costs. Larger investment pools also permit the selection of securities maturing at various times, which can enhance the average yield of the pool. These strategies, together with the investment advice of professional portfolio managers, are designed to maximize the total return earned by each fund offered.

The Lone Star Investment Pool benefits from its long relationship with the Texas Association of School Boards. The Pool’s administrator, First Public, is a wholly owned subsidiary of TASB, which has been serving public education in Texas since 1949.

“We’d like to congratulate Lone Star Investment Pool on its first 30 years and wish them continued success in the years to come,” said Dan Troxell, TASB’s executive director. “We know quality financial management is essential to strong public schools, so we’re proud of our relationship with the Pool and its ongoing work with districts and other public entities to make the most of every dollar, with a focus on safety, liquidity, and yield.”

Experience amid uncertainty

The steady expansion of Lone Star Investment Pool is a reflection of its success in navigating the challenges of public funds investing, often during uncertain economic times, including the 2008 Great Recession.

“That was a significant test, and the Pool provided a lot of protection during a tough time,” said Cole Hentschel, First Public’s director of sales. One of the key benefits of joining any investment pool is protection of principal. Under the Public Funds Investment Act, pools are obligated to prioritize safety of principal and liquidity above rates of return.

Another test for the Pool came last year during Winter Storm Uri, when districts needed liquidity to process debt service, payroll, and operating expenses amid outages that paralyzed the state.

“We didn’t skip a beat because we have a dual money manager model,” Hentschel said. “Even though one was down, we were able to transfer everything to the other manager to ensure districts were able to access funds to deal with routine and emergency transactions.”

That dual money manager model is a unique aspect of the Pool and underscores its commitment to serving investors. “It gives us diversification of investment ideas but also provides flexibility and safety,” Hentschel said. “It’s another check and balance.”

More recently, the Pool is managing an uncertain interest rate environment exacerbated by rising inflation. Although this volatility poses additional demands, Hentschel said the Pool’s two money managers — Mellon Investments Corporation and American Beacon Advisors, combined with parent company Resolute Investment Managers — have been with the Pool since its inception and have deep experience in public funds investing.

“That continuity is an advantage for navigating economic challenges because they have knowledge and history dealing with similar situations,” Hentschel said.

Klein ISD Chief Financial Officer Daniel Schaefer, who also serves on the Pool’s Advisory Board, said the district’s longtime membership in the Pool (since 1993) has made sense and offers ongoing value.

“The Pool allows the district to receive competitive interest rates in low-risk investments that are managed by a team of experts,” Schaefer said. “This allows the district to focus on our primary focus of educating children.”

The growth of the Pool has benefited participants in terms of scale, with lower transaction costs and rates of return than would be unachievable by a district trying to invest on its own.

“Our Klein ISD board has observed the value in placing our funds with Lone Star,” said longtime Klein ISD Trustee Georgan Reitmeier. “With two money managers, no matter the financial climate, our investments were safe and well-invested. It has been a trusted relationship over the years.”

The Pool’s governance model, which includes both a Board of Trustees and an Advisory Board, also ensures responsiveness to the specific needs of school districts and other government entities. “It allows districts to still be part of the process and decision making for the Pool, which ensures the needs of the participants are not only heard but met,” Schaefer said.

Keith Bryant, superintendent of Lubbock-Cooper ISD, agrees. “The greatest asset of Lubbock-Cooper ISD’s membership in the Lone Star Investment Pool is the management of funds by school-minded individuals,” said Bryant, who also serves as vice-chair of the Pool’s Board of Trustees. “Superintendents, school board members, and other school advocates guide the Investment Pool in the best interest of public schools, thereby benefiting the students of Texas, and providing a fund management service tailored to the needs of educational entities.”

Honoring HISD

In recognition of the 30th anniversary of the Lone Star Investment Pool, Hentschel recently honored HISD for its longtime support of the Pool with a special proclamation, thanking the district for its initial $10 million investment.

The proclamation was approved in November by the 11-member Lone Star Investment Pool Board of Trustees, all of whom serve on boards of school districts that are Pool participants.

“We thought it was important to recognize HISD’s foundational role in the success of the Lone Star Investment Pool,” said Robert Westbrook, who serves as the Pool’s chair and is a trustee from Schertz-Cibolo-Universal City ISD. “Not only was HISD the first investor but it also provided key leadership and support over the years to help us better serve our members.”

Two of the district’s chief financial officers served on the Lone Star Investment Pool Board, beginning with Leonard Sturm from 1991 to 1997, and continuing with Melinda Garrett from 1997 to 2006.

“Our long history with Lone Star Investment Pool has allowed us to make the most of every taxpayer dollar so we can take care of our students and staff,” said HISD’s Chief Financial Officer Glenn Reed.

New website for participants

Looking to the future, the Pool recently debuted a new website to better serve current and prospective participants.

“We’re very excited about the changes,” Hentschel said. “Our new website is mobile-friendly, easier to navigate, and more visually appealing. It’s part of our commitment to ensuring Lone Star Investment Pool continues to meet the needs of our participants through great functionality and modern design.”

Disclaimer: The testimonials, statements, and opinions presented here are applicable to the individuals depicted and may not be representative of the experience of other customers. Results will vary and there is no guarantee of future performance or success.

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