The city’s cash-bleeding pension funds have begun investing in risky “distressed” bonds sold by companies in financial trouble.
Four of the city’s five retirement systems have sunk a total of $388 million into a vulture-like investment fund called “disco,” short for distressed companies, which aims to profit off the carcasses of failing businesses.
City Comptroller Bill Thompson’s office has paid $1.4 million in taxpayer-backed fees to investment firm PIMCO to manage the fund.
Disco funds scoop up, for pennies on the dollar, bonds issued by companies going bankrupt or otherwise in financial trouble. The funds speculate they can later sell the bonds at a profit.
Such very risky investments are forbidden by the state pension funds, said Robert Whalen, a spokesman for the state Comptroller’s Office.
“It wouldn’t fit into our portfolio because of the risk,” Whalen said.
But the city calls it a good bet.
“All investments present risks,” Thompson’s office told The Post.
“This investment was determined to be a prudent one.”
The move comes as the pension funds for cops, firefighters and other city employees face a disastrous loss of 20 percent — about $20 billion in assets — in the fiscal year that ended June 30.
Taxpayers must plug the gap when the pension funds earn less than 8 percent a year, and the recent losses threaten to drain the city budget for years to come.