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ANNAPOLIS — A bill to require Maryland's pension fund to invest $50 million in bioscience and green technology sparked debate this week about the legislature's role in the fund's portfolio and criticism from some lawmakers that the state is being too conservative in its investment strategy.

The bill was the subject of a House Appropriations Committee hearing on Tuesday.

On the surface, the debate is about whether to require a minimum five-year period of investment in information, green and medical device technology, and bioscience businesses based in or relocating to Maryland.

But the debate's underpinnings raise broader questions about the management of the $32.5 billion State Retirement and Pension System of Maryland.

The system administers retirement accounts and pensions of 115,000 retirees and beneficiaries and future benefits for more than 199,000 active state government employees, teachers, law enforcement personnel, legislators and judges, as well as some local government employees and firefighters.

Pension system officials say the fund already invests in biotech and that they do not welcome investment strategies that are mandated by law.

"I'm not in favor of the legislature saying X dollars should be earmarked to any venture or sector," said Mansco Perry III, the pension system's chief investment officer. "I believe they should leave that up to the board and my staff."

Pension system officials' opposition to the bill "reflects a knee-jerk reaction that says, ‘We don't want the legislature telling us anything,'" said Robert J. Garagiola (D-Dist. 15) of Germantown, the bill's Senate sponsor. "But the fact is we've done that on many instances. We've told them to divest in Sudan, divest in Iran, we've put a limit on fees for investments in certain types of real estate funds."

While companies have reacted to the recent economic downturn by investing pension fund assets more conservatively, a recent New York Times story outlined how some states' pension systems are taking on greater risk in their investments, subjecting their pension funds to more volatility in hopes of recouping billions lost in the recession.

Maryland saw its fund lose 20 percent of its value in fiscal 2009, with assets falling as low as $24 billion before closing the year at $28.5 billion. As of Feb. 28, the fund had rebounded to $32.5 billion.

It was all done without dramatically altering the portfolio's asset allocation, said Treasurer Nancy K. Kopp (D), chairwoman of the pension system's board of trustees.

"We reviewed and set the asset allocation in fall 2008 before the [financial] crisis," she said. "And we are sticking to that allocation. It's a broadly diversified allocation. It has public and private equity and debt."

Since taking over management of the fund in March 2008, Perry has sought to control risk by increasing the state's investment in private equity and alternative investments, such as real estate. That has meant a slight shift away from public equity in an attempt to avoid the volatility of the stock market.

The pension system's goal is to reduce its allocation of public equity to 36 percent from the current level of 55 percent. Private equity makes up 2.7 percent of the fund. The strategic target is 12 percent.

Perry said his goal is to develop an asset allocation that compares with other states such as Washington, Oregon and Minnesota, where he served as executive director and deputy chief investment officer of the state's pension fund before coming to Maryland.

Perry said he was attracted to Maryland by its history of consistent investment returns.

But some lawmakers see that consistency as underperformance.

"Our problems in the pension plan are twofold: too-generous benefits and then underperformance of investments," said Del. Andrew A. Serafini, a certified financial planner. "And it's not just that the markets have been bad, which they have been. It's that we have underperformed even that."

Serafini (R-Dist. 2A) of Hagerstown cited a report released last month by The Pew Center on the States that said the state's pension liabilities are cause for "serious concern."

Maryland was one of eight states in the category whose pension plans are underfunded, have high unfunded liabilities and have contributions insufficient to what is actuarially required.

The House Appropriations Committee last week discussed "the need to be prudent and not try to regain all of our losses overnight," said Del. John L. Bohanan Jr. (D-Dist. 29B) of California.

"Our history is lousy returns," he said. "But you can't catch up by making a bunch of risky investments."

Still, state pension fund managers have not acted aggressively enough in pursuing technology venture investments, said Del. Brian J. Feldman, who is sponsoring the biotech and green ventures bill in the House of Delegates.

"It's been a very, very conservatively deployed fund," said Feldman (D-Dist. 15) of Potomac.

The pension fund recently invested in Quaker BioVentures, a Philadelphia venture capital firm specializing in life science companies.

Perry said he had hoped to invest $25 million, but the firm's investors made interests totaling only $17.5 million available.

The investment came after several discussions last year with Garagiola.

"Their argument is they're already [investing in biotech]," Garagiola said. "All I'm doing is saying keep doing it."

Perry and Kopp agree that the state shouldn't chase quick returns.

In a perfect world, Perry said, the General Assembly would stay out of his way.

"All of our funds would be much better off if we kind of focused on rolling 20-plus-year numbers and [the pension board] didn't meet as often and they let guys like me do my job and focus on it," Perry said. "But I guess I have to live in the real world."