(Bloomberg) -- The California State Teachers’ RetirementSystem, the second-largest U.S. public pension fund,earned 1.4 percent in the 12 months through June, missing itsreturn target for the second straight year.

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CalSTRS seeks to earn 7.5 percent on average over time to avoidfalling further behind in its obligations to 896,000 current andretired teachers and their families. The fund, which had $188.7billion in assets as of June 30, averaged returns of 7.8 percentover the last three years, 7.7 percent over five years, 5.6 percentover 10 years and 7 percent over 20 years.

“The CalSTRS portfolio is designed for the long haul,”Chief Investment Officer Christopher Ailman said Tuesday in astatement. “We look at performance in terms of decades, not years.The decade of the 2010s has so far been a good performer, averaging10.3 percent net.”

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U.S. pension funds have struggled to meet investing goals amidstock volatility, shrinking bond returns and slowingemerging-market growth at a time when retirees are living longerand health-care costs are rising. Long-term unfunded liabilitiesmay ultimately need to be closed by higher employee withholdingrates, reduced benefits or bigger taxpayer contributions.

The California Public Employees’ Retirement System, the nation’slargest pension fund with $302 billion in assets, earned 0.6percent for the latest fiscal year, according to figures releasedMonday. CalPERS trails its assumed annualized 7.5 percent rate ofreturn for the past three-, five-, 10-, 15- and 20-yearperiods.

CalSTRS and CalPERS are bellwethers for public pensionfunds because of their size and investment approach. Both havepressured money managers to reduce fees while also using theirinfluence as shareholders to lobby for environmental, social andcorporate-governance reforms.

CalSTRS returned 4.8 percent in the previous fiscal yearafter gaining 19 percent in 2014. Over the last decade, the teachersystem’s returns ranged from a 23 percent gain in 2011 to a 25percent loss in 2009.

The fund’s investments in stocks fell 2.3 percent last year,while fixed income and real estate both rose 11 percent and privateequity increased 2.9 percent. As of June 30, CalSTRS had about55 percent of its assets in global stocks, 17 percent infixed-income, 14 percent in real estate, 8.7 percent in privateequity with the balance in cash and other financialinstruments.

While CalSTRS outperformed its benchmark index for equitiesby 0.2 percent last year, its returns trailed in every othercategory.

Since 2014, CalSTRS’s unfunded liability has grown an estimated27 percent to $69.2 billion while CalPERS’s gap has increased 59percent to $149 billion, according to Joe Nation, a professor ofthe practice of public policy at Stanford University. Bothretirement systems’ assumptions of 7.5 percent returns are based onwishful thinking, he said.

“The assumption is we’re going to have a period like the 1990sagain,” Nation said. “And there are very few people who believethat you’ll get the equity returns over the next five or 10 yearsthat we saw in the 1990s.”