If there's one thing we've learned during the past five years, it's that risky financial bets always pay off.

It worked out well for the London Whale and JPMorgan Chase (JPM 0.77%). For the traders at MF Global and their clients. For everyone who bought multiple houses at the height of the market at subprime rates and thought they would flip them for a profit. For the banks involved in LIBOR manipulations and their clients.

It can only work out equally well for pensions.

Teachers learn new math
There's no question that pensions are in trouble, and have been for years. As a result of the LIBOR rate manipulation scandal, the Chicago Public School Teachers' Pension & Retirement Fund took a significant hit to its $9.7 billion pension account.

A law under consideration in Florida would end the $127 billion pension fund for state employees and instead put new hires into a 401(k) plan. Oregon and California are both facing massive liabilities in their public pension funds, as are Pennsylvania, Kentucky , and numerous other states across the nation . Boeing (BA -1.75%) is in union negotiations in which phasing out pension plans for new employees is a contentious and prominent issue. Verizon (VZ -0.42%) faced record losses in the fourth quarter, in part due to adjustments in the value of its pension funds. It also made a controversial move to de-risk its pension obligations by transferring a quarter of those obligations to a group annuity contract.

But a teachers' public pension fund in Texas seems to have found a way around these problems. The fund has invested $30 billion of its $140 billion pension fund in real estate, alternative investments, and private equity since 2008. So far, it's seen results: The private equity returns have averaged 4.8% over the past five years, and 15.6% over the past three.

It looks good on paper. But then, these things often do.

New regulations
The shift into riskier products comes, perhaps not coincidentally, as the Governmental Accounting Standards Board puts into place new requirements for how state and local governments report their pension plans. Michael Moran, a pension strategist at Goldman Sachs (GS 0.48%) issued a white paper stressing that the changes were merely accounting, not economic ones, but also admitted, "Funded status and pension expense measures are also likely to be more volatile under the revised reporting standards. "

Creative funding
In addition to alternative investments, public pensions are seeking out non-traditional sources of funding. The towns of North Providence and East Providence in Rhode Island will use $60 million each of the 2011 settlement of $500 million that the state won against Google. The state claimed the company illegally helped Canadian pharmacies sell to customers in the United States through targeted advertising. According to Moody's, the allocated funds will help reduce pension underfunding and annual pension contributions.

Looser requirements
In November, the non-taxpayer-funded government agency Pension Benefit Guaranty Corporation announced it was relaxing its requirements for companies issuing mass layoffs. Previously, the PBGC required financial assurances from the company that it would continue its pension contributions. Under a pilot program, only the companies identified as having a higher risk of default would be required to make additional contributions to the plan, or have a line of credit in place. A release from the PBGC stated, "This pilot program is an exercise of PBGC's discretionary enforcement authority. It will be modified based on experience." 

Extreme measures
Pension funds, like every other financial product over the past five years, have faced challenges and growing pains in an ever-changing global economy. Funds seeking out alternative investments with little oversight or regulation may see immediate results, but those results are unlikely to be sustainable. While many public and private entities are looking to transition to 401(k) plans, mismanaging a pension fund into oblivion isn't the most responsible means to accomplish it.

Alternative products won't fix a broken system, alternative revenue streams aren't reliable (there are only so many times a state can sue Google), and new regulations have limits to their real-world applications. Pension funds are dying patients on life support, the measures are extreme, and the prognosis isn't looking good.

Editor’s note: A previous version of this article misstated the timing of Verizon’s fourth-quarter earnings report. The Fool regrets the error.