Europe's debt crisis and slowing global growth held the biggest U.S. public pension fund to a disappointing 1 percent gain in the last 12 months, well below its return target and its hefty 20.9 percent gain the year before.

The small gain was well below the California Public Employees' Retirement System's new assumed annual rate of return, lowered in March by its board to 7.5 percent from a longstanding 7.75 percent to reflect a more cautious outlook on financial markets.

The fund's assets were worth $233 billion at the end of June. Their value fell in March 2009 to a recession low of about $160 billion from a peak of about $260 billion in October 2007.

"The last twelve months were a challenging period for all investors as the ongoing European debt crisis and slowing global economic growth increased market volatility and reduced equity returns," said Joe Dear, chief investment officer of the fund, best known as Calpers.