Hawaii’s largest public pension fund posted its worst performance in three years as it eked out a 4 percent gain in fiscal 2015 that returned just more than half of what was needed to meet future benefit obligations.

The state Employees’ Retirement System fund fizzled in the final quarter of the fiscal year — April to June — and rose just 0.7 percent, or by $32.8 million, according to a report presented to ERS trustees Monday by Portland, Ore.-based Pension Consulting Alliance Inc. Still, the small gain was enough to lift ERS assets to a record $14.41 billion, exceeding the previous high of $14.37 billion, reached March 31.

“It’s a disappointment but this was a challenging year,” ERS Chief Investment Officer Vijoy “Paul” Chattergy said. “The first two quarters of the year were flat. Then the market started to perform in the second half of this year, and the performance was quite good almost until the end of the period when the news out of Europe became negative (due to Greece’s economic turmoil). That drove the (ERS) return down 3 percent at the end of the fiscal year.

“Had it not been for the challenges with the financing for the Greek situation, the performance would have been measurably better. The timing of the negative news was unfortunate because it fell at the end of our fiscal year.”

The ERS, which provides retirement, disability and survivor benefits to 118,466 active, retired and inactive state and county employees, has been targeting a 7.75 percent long-term return rate to help fulfill its pension obligations. Pension reforms — including cutting benefits for new employees and increasing contributions — were implemented during the past four years to bring down the unfunded liability of the fund. A December report by actuary Gabriel Roeder Smith & Co. showed the ERS fund had only 61.4 percent of what it needed to pay all the pensions promised as of June 30, 2014, and based on current assumptions wouldn’t be 100 percent funded until fiscal 2040.

Chattergy said even though the pension fund stumbled in the latest fiscal year, its three-year annualized return of 11.3 percent and five-year return of 10.8 percent have exceeded targets.

“The three- and five-year are well above our assumed rate of return, which is what we want the portfolio to do,” Chattergy said. “We want it to meet or exceed that assumed rate over the long term. We don’t expect it to achieve the actuarial assumed rate every year — like this past year it was lower — but we hope over the long term it will meet or exceed it. That’s what happened in the three- and five-year, and if you go back to 1990, we’re right at 8 percent, which is where the assumed rate was for most of that time (before being lowered).”

The target rate of return will be slightly easier to hit in the current fiscal year, which ends June 30, 2016. The ERS board in September lowered its target to 7.65 percent for the 2016 fiscal year; 7.55 percent for the fiscal year ending June 30, 2017; and 7.5 percent from July 1, 2017, to June 30, 2040.

Of the fund’s three major asset classes, domestic equities led the way for the fiscal year as it rose 8 percent. Total fixed income, which includes domestic and international holdings, edged up 2.8 percent while international equities, plagued by the turbulence in Greece’s economy, fell 4.3 percent. Real estate, which is reported on a one-quarter lag, had the best performance of any category with a 14.6 percent gain. It was followed by private equity, reported on a one-quarter lag, up 12.8 percent; inflation-adjusted returns linked to bonds and timber, up 5.4 percent; and covered option calls (equities with downside protection), up 5.6 percent.

Last quarter, international equities were up 1.2 percent among the major asset classes, with domestic equities up 0.5 percent and total fixed income down 2.1 percent. In other categories with smaller holdings, real estate rose 6.4 percent, private equity increased 3.8 percent, covered option calls were ahead 2 percent and inflation-adjusted returns fell 2.3 percent.

Meanwhile, the ERS board still is considering candidates for the executive director post that was vacated in December by Wes Machida, who was appointed by Gov. David Ige to take over as the new state director of finance. Deputy Executive Director Kanoe Margol has been acting as interim executive director. The initial list of 67 applicants has been whittled down to four finalists.