It took five years, but assets in the state’s largest pension fund have returned to record levels.

The Employees’ Retirement System portfolio gained 4.7 percent in the fiscal first quarter, ended Sept. 30, to boost its value to $11.7 billion. That matched the previous high achieved during the same quarter in 2007, prior to the start of the banking and housing crisis.

"Risk-oriented assets supplied some of the strongest performance, as central banks throughout the globe continued to provide stability and inject liquidity into the capital markets," according to a quarterly report released Tuesday by Portland, Ore.-based Pension Consulting Alliance Inc., which advises the ERS board of trustees on investment decisions.

Pension Consulting Managing Director Neil Rue said the ERS has about 70 percent of its investments in high-risk assets and 30 percent in low-risk assets.

The pension fund — which provides retirement, disability and survivor benefits to about 112,000 active, retired and inactive state and county employees — is coming off its first losing fiscal year since 2009 when it fell 0.5 percent in the 12-month period ended June 30 of this year. Even though the fund has posted gains in 10 of the previous 13 quarters, its 40.6 percent unfunded liability is expected to increase in fiscal 2012 from its June 30, 2011, level of $8.2 billion. The actuary report for fiscal 2012 is due to be released next month. The unfunded liability is the difference between the estimated pension liabilities and the assets of the pension fund.

International equities were the best performers in the ERS portfolio last quarter as they rose 7.5 percent. Domestic equities were close behind with a 6.4 percent gain. Total fixed income, which includes both domestic and international holdings, increased 3.3 percent.

In other categories, covered option calls (equities with downside protection) rose 3 percent; inflation-adjusted returns linked to bonds and timber were up 1 percent; real estate, which is reported on a one-quarter lag, was ahead 0.4 percent; and private equity slipped 0.1 percent.

The ERS’ 4.7 percent return last quarter beat its policy benchmark — consisting of various indexes — of 4.6 percent but trailed the median peer return of 4.8 percent. The median fund encompasses 28 public funds that have assets greater than $1 billion.

For the first nine months of this calendar year, the fund is up 11.7 percent, but Pension Consulting cautions that there could be some obstacles through the end of 2012.

"The fourth quarter will likely be swayed, once again, by political and fiscal issues in the United States, and the broad complications that continue to plague Europe will presumably remain large factors impacting investor sentiment," the report said.

Rue said all eyes are on the so-called fiscal cliff that would bring mandated tax increases and spending cuts in the U.S. at the start of next year if the president and Congress fail to modify present legislation.

"The election and fiscal cliff issues are indeed playing out," Rue said. "The market is down about 5 percent since the election. Hopefully, there are remedies sometime before Christmas. Otherwise, there could be an overhang."