The state's largest public pension fund shrank last quarter to its lowest asset level in five years as the global recession sapped more than half a billion dollars out of the portfolio.

Despite outperforming its one-quarter, one-year, three-year and five-year policy benchmarks, the state Employees' Retirement System investment portfolio fell 6 percent in its fiscal third quarter ended March 31 and saw its assets decline to $8.1 billion.

Over the past year, the portfolio has decreased by $2.9 billion and lost more than a quarter of its value.

The portfolio's sixth consecutive quarterly loss dragged down its nine-month fiscal-year loss to 24.2 percent, putting it easily on track for its worst performance in 41 years dating back to 1968, which is as far back as the ERS can document. The portfolio's previous worst documented fiscal-year loss was a 6.7 percent decline in fiscal 2001. The 11.8 percent loss in the December quarter was the portfolio's worst quarterly loss since 1999.

“;These significant declines reflect continued historic, near-unprecedented losses across all major investment classes,”; according to a report from Portland, Ore.-based Pension Consulting Alliance Inc., which advises the ERS trustees on their investment decisions.

The pension fund provides retirement, disability and survivor benefits to more than 108,000 people.

Neil Rue, managing director of Pension Consulting, said the hemorrhaging in the ERS portfolio is “;no different than the majority of institutional portfolios on the planet.”;

In fact, the ERS portfolio matched the median-fund performance of large peers over the past quarter and has outperformed the group over the past one-, three- and five-year periods.

Still, Rue said, the ERS trustees are revisiting their investment strategy and will finalize it during the new fiscal year that begins on July 1.

“;They're conducting an asset-liability study,”; Rue said. “;They do that ever three to five years as part of the long-term strategic process for the portfolio.

“;If you think the investment crisis in the markets hit their bottom during the fourth quarter (of the calendar year), and we've come through that, then what you do is try to examine and take into account the impact of that crisis and do an assessment of where you are strategically.”;

The ERS portfolio saw declines in all asset classes last quarter except for total fixed income, which eked out a 0.2 percent gain for its domestic and international holdings.

In other major categories, domestic equity fell 8.8 percent, beating the policy benchmark of minus 10.8 percent; and international equity declined 11.7 percent, edging out the benchmark of minus 11.8 percent.

Among other categories, real estate, which has a one-quarter lag, fell 12.4 percent, and alternative investments slipped 0.5 percent.

Rue said the near-record rebound in the equity markets since the end of last quarter has helped ameliorate some of the bleeding in the portfolio.

“;It's probably recouped several million dollars of losses over last six weeks,”; he said.