The collapse in value of US state and local government pension plans is a disastrous double blow for them: they are being forced to sell off assets at huge discounts to pay out pensions, and are at the same time seeing their funding levels plummet to dangerous new lows.

In the past year the funds, whose collective $2,000bn-plus in assets make them key investors in every asset class, have lost about 40 per cent of their value through investment losses.