The Office of Hawaiian Affairs' investment portfolio dropped 24 percent in the last year, a victim of repeated stock market crashes and the global economic meltdown.

The portfolio is the main source of income for the semiautonomous state agency, which was created by the state Constitution to benefit native Hawaiians.

The original money came in 1993 when the state settled a ceded-lands claim for $139 million, OHA Executive Director Clyde Namuo told the Star-Bulletin.

At its peak last year, the fund was worth $444 million. A total of $22 million was withdrawn for OHA operations, and the fund is valued today at $315 million, according to Richard Pezzulo, OHA chief financial officer.

Namuo said OHA withdraws 5 percent of the portfolio's three-year average. That means the stock market downturn will affect the amount that can be withdrawn for several years.

“;In March we calculate the amount and base the OHA budget on that,”; Namuo said.

OHA also gets $3 million a year in direct state funds.

Much of the OHA budget is spent on grants. Last year, for instance, OHA gave out $18.3 million in grants in areas such as economic development, education and human services.

The stocks are invested by two global investment firms, Frank Russell Investment and Goldman Sachs Investment, according to Pezzulo.

The OHA board does not give the investment firms advice on what stocks to pick or sell, but rather directs them to come as close as possible to making an 8 percent return on the investment.

“;Every three to five years, we do a review of the long-term asset mix. What you don't want to do is panic when you are at the bottom (of a market),”; Pezzulo said. “;I think we have a very good plan in place.”;

The portfolio is diversified so that 25 percent comes from large-cap stocks and another 25 percent from fixed-income stocks; the rest is divided in 10 percent portions among small-cap stocks from the United States, international stocks, private equity funds, real estate and hedge funds.

Pezzulo said that the funds have shifted recently to holding more cash than usual.

“;Luckily we took $20 (million) of the $22 million out before September,”; Pezzulo said.

OHA's portfolio is made up of many hundreds of stocks, Pezzulo said.

“;We are so diversified because we use a manager of manager approach, so there is no single position in the fund that amounts to a significant position.

“;Even the hedge fund portion represents hundreds of funds. So any one fund is just a tiny sliver of the investment,”; Pezzulo said. He added that OHA did not have any money invested with the indicted financier Bernard Madoff.