UPDATE 1-NY pension fund dips 0.92 pct in 1st quarter-comptroller

Aug 17 (Reuters) - New York state's pension fund, the third-biggest in the country, shrank 0.92 percent in the first fiscal quarter, to $146.5 billion, Comptroller Thomas DiNapoli said on Fri day.

The latest performance far missed the assumed rate of return of 7.5 percent. If the underperformance continues, the state's counties, cities and towns might have to increase contributions.

DiNapoli's spokesman noted that the 7.5 percent assumed rate of return is a multi-year assumption.

The fund's investments also missed the target in the 2012 fiscal year, earning 5.96 percent.

Although the fund had positive returns in the last three years, "Like many investors, the New York State Common Retirement Fund has been weathering uncertainty in the financial markets since the end of our fiscal year in March," DiNapoli said in a statement.

Over the last two decades, the state pension fund has paid for 82 percent of the benefits with investment returns, and the Pew Center says New York's pension plan is one of the highest-funded plans in the country, he noted.

The nation's two biggest pension funds are the $153 billion California State Teachers' Retirement System (CalSTRS) and the nearly $238 billion California Public Employees' Retirement System (CalPERS).