Maryland’s $45.8 billion pension fund for state employees and teachers earned 2.68% for the past fiscal year, almost 5 percentage points below its target of 7.65%, but better than benchmark returns for its various asset classes, its Board of Trustees was told Tuesday.

“While earnings for this one year fell short of our expected rate of return, the board continues to focus on long-term performance,” State Treasurer Nancy Kopp, board chair of the Maryland State Retirement and Pension, said in a statement.

“Over the last five years our average return has been close to 9.4%, a much more relevant measure of the overall health of our investment portfolio. Although this has been a challenging year for most institutional investors, the wisdom of the board’s decision some time ago to diversify its portfolio has been borne out by its long term positive returns.”

The 10-year return was 5.77%, which includes losses in the Great Recession, according to Michael Golden, spokesman for the pension system. Twenty and 25-year returns were not available.

Robert Burd, acting chief investment officer until a newly hired chief is on board, said, “While absolute performance did not meet the actuarial target for the fiscal year, we are very pleased with the performance of our active management program, which continues to add significant value over the overall plan benchmark. For the fiscal year, active management added roughly $800 million in excess of the benchmark.”

Failure to meet the long term investment target of 7.65%, which is will be reduced to 7.55% in two years, would require state and local taxpayers to put more into the fund to meet the promises made to state employees and public school teachers.

Critics of the pension system have consistently disapproved of its investment performance compared to other public pension funds of similar size and the amount of money its pays to outside managers that handle such investments as private equity.

UPDATED 7/22, 9 a.m.: “The findings are troubling,” said Jeff Hooke, a senior fellow at the Maryland Public Policy Institute. “The investment policies suggest either a lack of numeracy or a decision process not driven by the best interests of the pensioners and taxpayers.” “Given that indexing has superior returns and lower cost attributes relative to active management, pension fund managers may have problems resisting a legal challenge from a union pensioner,” Hooke said.