Deploying State Funds to Invest in State Infrastructure and Housing

Dear Colleagues:

Infrastructure serves as the backbone of our daily lives and communities. It underpins economic activity and activates growth and development across regions. Investing in well-designed infrastructure can cause a boom in development, boosting regional economies all while creating opportunities and businesses. However, capital spending in infrastructure has fallen in recent decades across the United States – including here in Illinois. To address this gap in financing and demand for infrastructure spending, this year my office officially launched the FIRST Fund – a first of its kind $1.5 billion impact investment fund dedicated to building and strengthening Illinois’ infrastructure and real estate.

Investments in local infrastructure can produce a plethora of benefits from access to clean water, internet connectivity, healthcare, quality education, to buttressing our communities against natural disasters. National efforts have already been put in place to increase spending at the federal level. Coupled with the passing of the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, the FIRST Fund is the type of vehicle that is equipped to support and strengthen these efforts in Illinois. Through this vehicle, we aim to help bridge the gap in Illinois between the need for innovative infrastructure projects throughout the state and the availability of local financing for these types of projects.

With the creation of the FIRST Fund, Illinois will now house the first state-run real assets fund dedicated to local economic development. One of our main priorities is to drive sustainable development, support and encourage fair wages and benefits for workers, contractors, and subcontractors – all while producing a market return. I believe that an adequately compensated and trained worker delivers a higher quality product and service. I’m optimistic that this innovative structure can serve as a model for other states across the U.S. who are looking to drive local investment and spur economic development within their respective state.

Institutional investors such as ourselves typically evaluate infrastructure investments in terms of their potential financial returns. But in addition to strong potential investment returns, these types of investments can bring tangible social benefits. They are part of a sound financial investment strategy, but they are also an investment in local communities. Equally important to our office is continuing to promote diversity, equity, and inclusion, and create opportunities for all Illinois residents. True economic development is inclusive and all-encompassing. We will invest with a focus toward promoting local minority, woman, veteran, or persons with disabilities (MWVD)-owned or managed investment firms, as well as encouraging investment into and partnership opportunities with quality local diverse-owned stakeholders and communities across our development ecosystem.

Investing with a unique regional focus enables financial returns while supporting investments that grow the local economy and generate additional impact in the State. We have taken a similar approach through our Illinois Growth and Innovation Fund (ILGIF) investing in our local startup community to not only drive returns, but to further catalyze economic development. After taking learnings from our ILGIF program, we recognized the significant positive impact a state entity could make investing in real assets with a vehicle such as the FIRST Fund.

With the FIRST Fund, I hope to provide a blueprint for what it takes to successfully approve, launch, and execute a real assets program with financial returns, sustainability, diversity, and local development in mind so that other states might implement similar programs to bolster infrastructure throughout the entire nation. This type of fund has the potential to prioritize the interests of states, drive investments into resilient development projects, all while creating inclusive opportunities for local residents. Through a vehicle such as the FIRST Fund, states will have an opportunity to improve infrastructure quality, access, and resilience. I look forward to sharing our progress in the near future and hope to inspire others Treasurer’s to create something similar.

The Office of the Illinois State Treasurer is excited about the impact the FIRST Fund can bring to Illinois. Anyone interested can learn more by visiting our website.

Sincerely,
Michael Frerichs
State Treasurer of Illinois.

Treasurer Frerichs is the incoming President of NAST and previously served as the Chair of the College Savings Plans Network (CSPN) and NAST's ABLE Committee.