Pension fund sags 13.3% in October

But Massachusetts' losses for year are in line with other states'

The Massachusetts public pension fund lost 13.3 percent of its value as stock markets plunged in October, officials said yesterday, crediting its diversification with preventing deeper losses.

The state's Pension Reserves Investment Trust was worth about $40 billion as of Oct. 31, after one of the worst months for stocks in history.

The Standard & Poor's 500 stock index fell 17 percent in October.

For the first 10 months of the year, the state fund is down 26.9 percent from its starting point of about $53 billion.

"We are in unprecedented economic times, and no investor is immune," said Michael Travaglini, executive director of the pension agency.

The funds pay for the retirement benefits of thousands of state and local government employees.

As stinging as they are, Massachusetts' losses are in line with others.

The average hit so far this year to large public pension funds is 28 percent, according to figures from the pension advisory firm Cliffwater LLC that the state provided.

In a recent report, Moody's Investors Service estimated state and local systems have seen a 35 percent decline in their stock investments alone this year.

Travaglini said losses for the Massachusetts system on US stocks are 37 percent for the year so far, while international equities are down 42 percent.

Together, those two categories make up about half of the system's total investments.

Offsetting those losses were better performance from bond holdings, down only 5 percent for the year, while private equity investments were off 2 percent and hedge funds were down 15 percent.

The results come as the state system approaches a regular three-year review of how it allocates money among asset classes.

Travaglini said it is too soon to estimate how the allocations might change.

The fund's total holdings also affect how much money the state must contribute from taxpayers each year to be sure it has enough money to pay for future retirement benefits, which now cost about $1.5 billion a year.

Like the funds of other states, the Massachusetts fund isn't fully funded; the roughly $53 billion it held at the start of the year represented about 79 percent of its obligations.

The state will invest $1.47 billion into the fund during the fiscal year that ends on June 30.

Nationwide, defined-benefit pension plans, including those offered by corporations, lost more than $120 billion in October, dropping their funding ratio to 92.7 percent, a 12-point decline since the start of the year, according to a study by the consulting firm Millman Inc., of Seattle.

Ross Kerber can be reached at kerber@globe.com.