New Mexico's investment funds rebounded somewhat in 2009, making the state stand out against others that saw big hits to their pension funds in particular.

That doesn't mean the investment climate has been without pitfalls and detractions, however. And, the state in some cases is still trying to gain back what it lost in recent years.

Like with most funds, New Mexico's retirement investments fluctuated throughout the year. Meanwhile, the State Investment Council, which oversees state permanent funds, has been the subject of unfavorable headlines related to larger investment scandals.

Funds managed by the council, the Educational Retirement Board and the Public Employees Retirement Association, each grew by about $2 billion in 2009 as the financial climate recovered from last year's global credit crisis, officials said.

Terry Slattery, executive director of the Public Employees Retirement Fund, said his fund's performance rate this year was just over 17 percent, about twice its target.

"Of course, we have only earned back about half of the losses from 2007-2008 so we still have a long way to go to get back to the asset levels we had prior to the recent market downturn," he said earlier this month.

Slattery said that for the nine-month period that ended Sept. 30, PERA fund investment performance was above median performance compared to its peers. At the same time, the fund was ranked in the 43rd percentile, with the first percentile being the best, he said. The rankings are done by the PERA's investment consultant, R.V. Kuhns and Associates.

At the ERB, the fund posted a 13 percent return for the quarter that ended Sept. 30, according to Jan Goodwin, the executive director.

Other states have suffered much worse fates this year. Wisconsin officials reduced benefits for retirees and mandated higher 2010 contributions for employers.

California's pension fund lost nearly $56 billion, or a quarter of that state's investment portfolio.

In Maine, the state has a unfunded liability for state and teacher retirement plans of about $3 billion. The state might have to make a $244.5 million pension payment out of its general fund in 2010, according to reports.

Still, New Mexico's pension and retirement funds are not in the clear; the Legislature has increased the time a new employee must put in before collecting benefits, for example, and has debated increasing employee contributions. The employee contribution rate at the ERB, for example, is 9.4 percent of the worker's salary and the employer contribution rate is 10.9 percent.

As for the money managed by the State Investment Council, it has returned about 16 percent for the year to date. The council's goal is an 8.5 percent return, said spokesman Charles Wollmann.

Over the past five years, however, returns still lag at only 2.9 percent per year, he said.

Bob Jacksha, interim state investment officer, said it's hard to compare New Mexico's permanent funds to others, because many states don't have them.

"It's hard comparing New Mexico to other 'states,' as only a handful of states had the foresight that New Mexico did in creating a permanent fund," he said in an e-mail.

The fund, made up of extraction fees on oil and natural gas that are then invested, benefits universities and schools, among other things.

Jacksha said the Land Grant and Severance Tax Permanent Funds distributed more than $700 million to its beneficiaries over the last year, while receiving only about $400 million.

Still, he said "performance in recent history has not been up to expectations."

Jacksha replaces Gary Bland, who resigned in October.

The office is under scrutiny after the former chief investment officer at the ERB filed a lawsuit alleging Bland and ERB chairman Bruce Malott were instructed by former Richardson chief of staff Dave Contarino to invest with Vanderbilt Financial and associated companies in exchange for political contributions from the firm's employees. According to federal campaign finance records, Vanderbilt, its employees and their families contributed more than $15,000 to Richardson's presidential campaign. All men accused in the case have denied wrongdoing and denounced the lawsuit.

The state District Court lawsuit alleges state taxpayers were defrauded of $90 million.

At the same time, the U.S. Attorney's Office and the Securities and Exchange Commission are investigating governmental investment deals in New Mexico. Federal agents have interviewed staff at the investment office and the pension fund, and a grand jury has subpoenaed documents related to placement agent fees on New Mexico investments.

When asked recently week what the office is telling taxpayers who are concerned about how the alleged scandals at the State Investment Council are affecting the state's investments, Jacksha said it is helping authorities and has enacted new policies safeguard investments.

"The Investment Council has acted decisively in investigating and ultimately terminating an investment consultant accused of wrongdoing in New York. In the wake of that scandal, the Investment Office staff gathered a significant amount of data regarding third party fees paid to fund marketers, and has delivered that and related information to the proper authorities. We continue to actively assist regulators as they investigate any improper activity that may have occurred."

The Associated Press contributed to this report.

Contact Kate Nash at 986-3036 or knash@sfnewmexican.com. Read her blog at www.greenchilechatter.com.

STATE INVESTMENT FUNDS IN 2009

Educational Retirement Board: Funds managed by the board totaled $6.6 billion at the start of the year; they were worth $8.1 billion as of Dec. 11. That was still below previous levels of $11.613 billion as of June 30, 2007, and $9.378 billion as of Dec. 31, 2007. The group this year had 63,819 active members and 32,496 retirees and beneficiaries.

Public Employees Retirement Association: Funds managed by the association totaled $8.9 billion at the end of last year; they were worth $10.5 billion as of Dec. 14. As of June 30, 2007, they had been worth $13.292 billion and were worth $12.524 billion on Jan. 31, 2008. There are about 25,800 retirees and beneficiaries on the PERA system.

State Investment Council: Funds managed by the council were worth $11.6 billion at the start of the year and as of Nov. 20 were worth $13.1 billion. On June 30, 2007, they had been worth $16.104 billion and were worth $16.085 billion on Dec. 31, 2007.