Philadelphia's $5.7bn ‘quiet crisis'

"We have a very mature pension fund. We have more retirees than we have active members. That imbalance is a big cause of our problem. Also, we got hit in 2008/2009," he says, speaking by phone from the local government offices.

The fund lost almost 20 per cent in 2009 in the midst of the financial crisis. Overall, however, it has performed well, returning 7.4 per cent a year on average since 1995, making its huge deficit all the more surprising.

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The biggest focus now is on the pension fund's relationship with asset managers. Throughout the hour-long conversation, Mr Dubow continuously talks about searching for investment managers who offer "value for money".

Through its advisers, the pension fund began a review of the fees it was paying to hedge fund managers in 2012 and expanded this to include private equity managers last year.

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In the 18 months to the end of December, the fund cut the assets invested in hedge funds by 40 per cent, to $338m, pulling money from managers such as Beach Point Capital Management and Kynikos Associates, the hedge fund founded by Jim Chanos, the renowned short-seller.... At the same time, the pension fund's use of passive products, which provide cheap index exposure, has almost doubled to represent 40 per cent of assets.

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For this Philadelphia resident the problems with the pension fund are personal. The pension contributions are eating up more and more of the city's budget, leaving less money to spend on services such as the fire brigade, police and recycling. The cost of pension contributions has increased from 6 per cent of the city's budget to 15 per cent over the past decade.

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Despite the strain the pension fund puts on the city's services, the scheme paid out a bonus to its members last year. Under the city's rules, when the fund performs better than its target, some retirees get a bonus. In 2014, the scheme returned 15.7 per cent, double its target... Instead [of talking about this], he returns to talking about the city's efforts to improve the scheme's funding ratio, a measure of assets to liabilities. This figure stood at 45.8 per cent in 2014, compared with an average of 75 per cent for city and county pension plans across the US, according to Wilshire Consulting, the investment advisory company.