The assets in Hawaii's largest public pension fund plunged $1.4 billion in the July-September quarter as the European debt crisis and the United States' fiscal situation rippled through the stock market.

Hawaii's Employees' Retirement System said Tuesday its investments lost 11.2 percent of their value in the quarter ended Sept. 30, and the fund's assets dropped to $10.2 billion from a near-record $11.6 billion on June 30.

The ERS portfolio performed worse than the median of 26 public funds with assets of $1 billion or more, which recorded a 9.0 percent decline.

"Risk aversion remained the dominant force in the markets, as volatility and worries about economic growth funneled investors into U.S. Treasuries, sending yields to all-time lows," Pension Consulting Alliance said in its report.

It was the first quarterly loss for the ERS fund after four straight profitable quarters and eight winning quarters in the previous nine.

The July-September quarter is the first quarter of the state's fiscal year. The fund's 11.2 percent decline was an inauspicious start of the new fiscal year and follows a fiscal year when the fund gained 20.7 percent, its best return in a quarter-century. For the calendar year the fund was down 6.4 percent through the first nine months.

The ERS fund provides retirement, disability and survivor benefits to more than 111,000 active, retired and inactive vested state and county employees.

The ERS fund was hurt the most last quarter by the performance of its equity holdings. International equities fell 21.2 percent while domestic equities tumbled 17.2 percent. Private equity investments had the best return, up 2.4 percent.

Total fixed income, which includes both domestic and international holdings, rose 1 percent. Real estate, which is reported on a one-quarter lag, edged up 0.6 percent. Returns linked to oil and other commodities slipped 0.1 percent.

By comparison, the total return of the Dow Jones industrial average during the quarter was a negative 11.5 percent, while the Standard & Poor's 500 index fell 13.9 percent and the Nasdaq composite index decreased 12.7 percent.