Mass. pension fund posts best return in 25 years

The Massachusetts state pension fund posted a 22.3 percent gain for the fiscal year that ended June 30, its best return in 25 years, Treasurer Steven Grossman said.

The fund closed the year with $50.3 billion in assets, adding $9 billion in value over the prior 12 months. Performance was led by a strong stock market, with global equities leading the way, following by private equity real estate and alternative investments like timber.

The strong returns came on the heels of one of the fund’s worst periods, amid the financial crisis of 2008 and 2009. Grossman, who is chairman of the pension fund board, said he and the staff were “pleased and gratified’’ about the performance for 2011. Still, he sounded a note of caution amid the current worries over the national debt crisis and the economy.

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“We recognize that it’s a tough year and interest rates are doing what they’re doing, and the markets are volatile,’’ Grossman said in a Globe interview. “Everybody’s got their head down and they’re working hard.’’

Despite a falling market in May and early June, the pension fund for state workers regained ground in recent weeks and notched its second-best year ever. The fund’s best performance, in 1986, was a 28.1 percent return.

The past year was a transition period for the fund, with Grossman and the pension’s executive director, Michael Trotsky, in their first year on the job. It was a year in which officials sought to re-examine the way the state invests in hedge funds, and to do a better job managing risk and take a harder look at sub-par investment managers.

But Trotsky attributed the year’s gains to sticking to the board’s plan, and not taking a knee-jerk reaction to the losses from the financial crisis. “We just stuck to our knitting and took a long-term view, and evaluated managers that were underperforming,’’ Trotsky said. “We did stabilize the organization and kept key employees. Stability is key.’’

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