(Bloomberg) -- The California Public Employees’ RetirementSystem, the largest U.S. public pension fund, isratcheting down expected investment gains over the next decade aslow interest rates and a gloomier stock market depress returns.

Related: CalPERS funding level drops 3percent

The $306.2 billion pension fund expects an average return of6.21 percent, which is 90 basis points, or 0.9 percent, less thanthe forecast two years ago, Chief Investment Officer Ted Eliopoulossaid Monday at an investment committee meeting. The forecastcame from consultant Wilshire Associates, which issued a rosierlong-term prediction: a 7.83 percent return over 30 years.

CalPERS dimmed its outlook afterreporting a gain of 0.6 percent in the fiscal year ended June 30,with losses in both stocks and forestland. That followed a 2.4percent return in fiscal 2015.

“The next two years, the next five years, and perhaps the next10 years are shaping up to be the most challenging marketenvironment for us, for institutional investors and for pensionfunds going forward,” Eliopoulos said today in Sacramento.

CalPERS investments must return an average of 7.5 percentover the next 30 years for the fund to meet its obligations toretirees without turning to taxpayers. The fund, as of 2014,had about 76 percent of the assets it needed to meet its long-termanticipated obligations, according to information onthe CalPERS website.

CalPERS’ annualized returns were 6.9 percent for the last threeyears, 5.1 percent for the last 10 years and 7 percent over 20years, according to a presentation to the board last month. It isamong U.S. pensions under pressure to boost investment returns asfunding shortfalls increase amid an aging population and lowinterest rates.

Wilshire attributed much of its less-optimistic forecast topublic stocks, the largest single category of CalPERSinvestments at roughly 52 percent of the total fund value as ofJune 30. Stocks are likely to return an annualized 4.7 percent overthe next 10 years, the Santa Monica, California-based consultantsaid, below CalPERS’ 5 percent benchmark.

Eliopoulos said CalPERS will adjust its asset allocationsto cushion its holdings against the weaker-than-expected equitymarket.

Members of the investment committee called the forecast soberingand said it points to the need to review both the breakdown of thefund’s holdings and its 7.5 percent return assumption. CalPERSofficials have said the anticipated rate of return is stillrealistic, noting that investments have earned an average annualreturn of 8.3 percent since the current fund structure was createdin 1988.

“I don’t think we can always rely on saying that markets arecyclical given that we’ve reached that inflection point,” boardmember Dana Hollinger said at Monday’s meeting.

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