The Hawai'i Employees' Retirement System's assets declined by roughly $600 million during the first 15 days of September as worries about the economy and the financial health of investment banks roiled Wall Street.

Rod June, chief investment officer for the pension plan serving state and county workers, said assets declined from about $10.8 billion at the end of August to $10.2 billion yesterday morning.

"While we're concerned about what's happening in the market, we're well diversified," said June, who was keeping a close watch over the situation and talking with money managers who invest funds for the ERS. He said it's typically worse to sell when the market drops significantly.

"We are a long-term investor. We're going to stick it out," June said.

Turbulence in stock markets in recent days have sent stocks plummeting from levels at the start of the month. On Monday stocks had the worst performance in about seven years as Lehman Brothers filed the largest bankruptcy in U.S. history and Merrill Lynch was forced to seek a buyer. In the first 15 days of September the Standard & Poor's 500 Index of stocks tumbled 7 percent.

The ERS, which has stocks, bonds, real estate and other investments, was off by about 5.7 percent by comparison during the same period. The decline may be unnerving to retirees who rely on pension payments for their retirement money. But even at $10.2 billion the ERS has more than enough money to meet its current requirements.

"Given the turmoil in the markets, I think our retirees can take comfort that their benefits are intact," June said.

His office also has checked on how much the ERS held in six troubled companies, including Lehman, Merrill Lynch, Washington Mutual and American International Group.

The companies represent about 0.44 percent of the ERS assets. Most of that is in fixed-income and debt instruments from the companies. June said one of the managers, Pacific Investment Management Co., noted the ERS investment was all in high-quality debt instruments that are expected to rebound when markets settle.

He also noted that it's also important to realize the decline from $10.8 billion to $10.2 billion was a paper loss and that decline may be made up when markets recover.

The decline would be worrisome if markets remain sluggish since the ERS strives to meet an 8 percent return each of its fiscal years that run from July to June.

During the latest fiscal year that ended in June, the ERS had a return of negative 3.4 percent. Its peer plans had a median return of negative 4.4 percent during the period.

Over the past three and five years, the ERS has averaged an 8.3 percent return and 10.1 percent annually.

Missing the 8 percent benchmark return over an extended period of time would increase the amount of unfunded liability of future benefits and possibly require more funding from the state and counties.