The investment growth in Connecticut’s state pension funds for fiscal year 2011 was the highest in 23 years, state Treasurer Denise L. Nappier announced Wednesday.

Net of expenses, the return on investments made for the collective Connecticut Retirement Plans and Trust Funds will be around 21 percent for the fiscal year, Nappier said in a statement.

The funds were valued at $25.2 billion at the end of June, up by $3.3 billion since the end of the last fiscal year. Nappier said she achieved the higher returns by positioning CRPTF to take advantage of a rebound in domestic and emerging equities markets. That added $4.5 billion to the pension assets market value, she said.

The past year’s growth is a compliments strong returns in fiscal year 2010, when the funds added a net gain of $1.5 billion, she said.

The high return on pension fund investments are a piece of good news in tough times, she said.

“While there remain many challenges to our state, national and global economies,” Nappier said, “this record-setting performance is evidence of the strength of our pension funds and investment strategy, even during tough economic times.”

Even so, Nappier said the outlook for capital markets going forward is troubling and the overall economy is still showing signs of weakness.

It may be years before the economy recovers as unemployment rates remain high and economic growth has been slow.

While the pension funds continued to post a high investment return in 2011, it may not be realistic to expect returns to continue to meet their actuarially determined rate of between 8.25 and 8.5 percent in the coming years, she said.

“We did it this year with a whopping 21 percent return, but a sustainable pension fund must be able to meet its financial objective over the long haul,” she said.

Nappier called on Gov. Dannel P. Malloy and the legislature to continue their commitment to fully fund the state’s pension obligations every year.

She also suggested that the retirement system and their actuaries rethink their long-term investment performance expectations given that it will take time for the economy to recover.

The high investment returns made on the funds in 2011 are also threatened by recent news that state pension plans have been paying out excess benefits to some retires, violating IRS’s annual pension cap, Nappier said.

The violation could cause the pension funds to lose their tax-exempt status, she said.

Nappier recommended the state either eliminate excess payments altogether or use non-pension fund pay for them.

“If the state does not act quickly and decisively, the penalties for violating the IRS rules may erode the strong investment gains achieved over the past two years as the CRPTF continues to work its way back from losses caused by the historically difficult market environment of 2008–2009,” she said.