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Reigniting the treasury management debate

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LGC’s finding that half of the 10 councils most affected by the Icelandic banks crash are still using the same advisers a year later reignites the treasury management debate.

Discussions afterwards highlighted the need to amend guidance, the role advisers might play in governance, and the need to reappraise the balance between maximising investments and preserving capital and maintaining liquidity. Pooled investment vehicles were mooted as an option for reducing risk through diversity.

This week the debate moves on. The Local Government Association has backed the Chartered Institute of Public Finance & Accountancy’s proposed alterations to the treasury management code and is working on a council-specific money market fund. Councils have been able to invest in such funds since 2002, but the LGA proposal may offer added benefits.

Approaching the Iceland anniversary it is significant that no UK-managed money market fund was in Icelandic banks

Emma Maier, editor of LGC

Parallels can be drawn with the voluntary sector, which invests £8.2bn in pooled funds - much of it via common investment funds (CIFs) open only to charities. CIFs offer charities tax benefits not available for local authorities, but other benefits will apply, not least the confidence generated by a dedicated scheme and acting in line with peers.

Approaching the Iceland anniversary, it is also significant that no UK-managed money market fund was in Icelandic banks (says the Investment Management Association).

If the fund gets off the ground it may make pooled funds more attractive.


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