The Massachusetts state pension fund posted a 15.2 percent investment gain for 2013, as strong markets helped the fund add $7.9 billion to its coffers.
US equities were the strongest performers, followed by private equity.
Hedge funds also produced strong gains, as the pension fund began to reap the benefits of direct investing, instead of middleman fund-of-funds.
“This was an outstanding year that capped five really strong years,” Michael Trotsky, chief of the Pension Reserves Investment Management, said at a public meeting Tuesday morning.
State Treasurer Steve Grossman predicted that the strong returns would lead to a decrease in the unfunded pension liability for the year.
Mindful that markets have rallied vigorously since the financial crisis, the pension fund’s overseers said they are looking to protect against future drops in the market. They presented a proposal to the investment committee Tuesday to move a 10 percent slice of the bond portfolio into longer-duration 20- and 30-year bonds. Under the plan, they would move $2 billion in the first three months of the program, with a total of nearly $6 billion ultimately moving.
Board members had in-depth discussions about whether bonds remained too risky a bet to count on for insurance against falling equities.