Hawaii’s largest public pension fund posted a 2.7 percent investment gain last quarter to hit an all-time high in assets.

The state Employees’ Retirement System fund grew by about $300 million in the January-March period to reach $14.37 billion in assets, according to a report presented to ERS trustees Wednesday by Portland, Ore.-based Pension Consulting Alliance Inc. The new asset total exceeded the previous high of $14.12 billion reached June 30.

While the added $300 million helps, the fund is still immersed in a long-term game of catch-up as it tries to pay down its unfunded liability of $8.58 billion.

The ERS, which provides retirement, disability and survivor benefits to 118,466 active, retired and inactive state and county employees, targets 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.

The growth last quarter follows two weak quarters that left the fund up just 3.3 percent through the first nine months of the fiscal year that began July 1.

Given the fluctuation of the markets, ERS Chief Investment Officer Vijoy "Paul" Chattergy said the target rate of return is meant to be achieved over the long term, as it’s not practical to hit that average every year.

Duriong the past 12 months, the ERS fund was up 7.5 percent, while its three- and five-year returns were up an average of 10.5 percent and 9.3 percent, respectively.

"We always would like to do better than any number we put up," Chattergy said. The target "is 7 3/4 percent, and that’s what you want to hit on average over the long term. We’re going to be above it sometimes and sometimes we’ll be below it. But we’ve been above it the last couple of years."

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

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.

International equities led the way last quarter with a 2.9 percent return while domestic equities were up 2.3 percent. Total fixed income, which includes domestic and international holdings, rose 2.4 percent.

"I think the performance (of the portfolio) was fine," Chattergy said. "We’ve seen some strong returns from our private equity fund managers and we’ve seen some cash come back into the portfolio from very profitable sales in real estate. We also have done well on a one-year basis with our U.S. exposure in equities (up 12.1 percent)."

Real estate, which is reported on a one-quarter lag, increased 4.5 percent while private equity, also reported on a one-quarter lag, rose 3.3 percent.

In other categories, inflation-adjusted returns linked to bonds and timber gained 5.4 percent, while covered option calls (equities with downside protection) increased 2.1 percent.

Chattergy also said the ERS board has whittled down the initial list of 67 applicants to under 10 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 the interim executive director.

"We’ll come up with a finalists list and are hoping to interview finalists later this month," Chattergy said.