The Teacher Retirement System of Texas, the country's fifth-largest public pension fund, has also used leverage funds since 2019.

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Leveraging can help multiply market gains in bull markets, but it can also increase losses during the bear times.

While the majority of pensions still don't use borrowed funds, there has been a sharp increase over the last four years. Before 2018, none of the largest funds used leverage.

The California Public Employees' Retirement System building in Sacramento, California July 21, 2009.

At the same time, funds began taking on riskier assets during the bull run and low-interest environment to make up for some insolvency.

Instead of increasing fees or costs to make up for a lack of funding, pension managers have opted to raise their annual growth target rate and engage in riskier investing behavior to meet it. In many states, if funds end up going bust because of that strategy, the onus of meeting payout requirements will fall on the shoulders of taxpayers, found a study by the Boston Federal Reserve.

Analysts say pension funds are now operating more like hedge funds and treading on risky footing. It's also typically the funds in the most financial trouble that take on these trades.

The Teacher Retirement System of Texas, the country's fifth-largest public pension fund, has also used leverage funds since 2019.

*

Leveraging can help multiply market gains in bull markets, but it can also increase losses during the bear times.

While the majority of pensions still don't use borrowed funds, there has been a sharp increase over the last four years. Before 2018, none of the largest funds used leverage.

The California Public Employees' Retirement System building in Sacramento, California July 21, 2009.

At the same time, funds began taking on riskier assets during the bull run and low-interest environment to make up for some insolvency.

Instead of increasing fees or costs to make up for a lack of funding, pension managers have opted to raise their annual growth target rate and engage in riskier investing behavior to meet it. In many states, if funds end up going bust because of that strategy, the onus of meeting payout requirements will fall on the shoulders of taxpayers, found a study by the Boston Federal Reserve.

Analysts say pension funds are now operating more like hedge funds and treading on risky footing. It's also typically the funds in the most financial trouble that take on these trades.