STIF - Frequently Asked Questions
What is STIF?
Short-Term Investment Fund (STIF) is an investment pool of
high-quality, short-term money market instruments. Operated in a
manner similar to money market mutual funds, STIF is rated AAAm by
Standard & Poor's, and has an average maturity of under 60 days.
Created in 1972, STIF serves as an investment vehicle for the
operating cash of the State Treasury, state agencies and
authorities, municipalities, and other political subdivisions of
What is STIF's Investment objective?
STIF seeks as
high a level of current income as is consistent with, first, the safety of
principal invested by the State, municipalities and others, and, second, the
provision of liquidity to meet investors' daily cash flow requirements.
How has STIF performed over the past several years?
STIF has performed quite strongly. For the trailing three-, five-, seven-, and
ten-year periods, STIF's compounded annual total return was 0.35 percent, 0.27
percent, 0.25 percent, and 0.76 percent, net of all expenses and contributions
to reserves, exceeding returns of its primary benchmark for all time periods.
Viewed on a dollar-for-dollar basis, had one invested $10 million in STIF 10
years ago, that investment would have been worth $10.8 million at June 30,
2017, versus $10.6 million for a hypothetical investment in the MFR Index.
During the past 10 years, STIF's above-average
performance has earned an additional $66.5 million in interest for Connecticut
governments and their taxpayers.
What is the advantage of investing in a pool such as STIF?
STIF allows the complete, same-day liquidity of an overnight investment with
the yield of longer-term securities. A pool such as STIF also provides
diversification of securities and maturities, which reduces risk. STIF assets
have ranged between $4 billion and $7.2 billion the last few years,
providing individual investors with the benefits of its substantial purchasing
What is STIF's designated surplus reserve?
STIF was established in 1972, a reserve was created to enhance its primary
objective of safety. The reserve presently contains in excess of $58.0
million, and is added to daily at the annualized rate of one-tenth of one
percent of the Fund's value, until it reaches one percent of the value of all
investments in the Fund. Should a significant loss from a security default or
a decline in market value of a security occur, it would be charged against
this account. This reserve provides a level of security which very few money
funds or pools offer their investors.
What are floating rate securities?
securities are securities in which the interest rate paid to investors
fluctuates at specific times by a formula specified in the indenture based on
standard short-term money market interest rate benchmarks such as the Fed
Funds, Prime, LIBOR, and Treasury Bill rates. STIF purchases only those
securities in which the interest rates move in the same direction and in the
same amount as the benchmarks.
Why does STIF purchase floating rate securities?
Floating rate securities enable STIF to earn slightly higher yields with
similar credit risks. The issuer is willing to pay a slightly higher yield on
the floating rate security because it has access to the funds for a longer
period of time.