The state Investment Office lost $692 million in the past budget year, but the boss still got a hefty bonus - bringing his annual salary to more than a half million dollars.

The Legislature's Executive Board was told Monday that state investments lost 8.65 percent in the fiscal period ending June 30. The office had a 21 percent return in the previous fiscal year.

State Investment Officer Matt Clark warned the board that this year may be no better than the just-ended one.

"We need to brace ourselves for another bad year," he said.

However, Clark said state investments, on average, have done much better over the past decade than comparable funds across the nation.

Lawmakers complimented Clark on that performance and unanimously voted to give him an annual bonus of $147,178 that was based on comparisons to returns of comparable investment programs. Combined with his annual salary, the brings Clark's total compensation package to $518,170 this year.

"You have to look at the long term, not just a single year," said Rep. Larry Tidemann, R-Brookings, who chairs the Executive Board.

"Despite a tough year, we think they're doing a great job," added Sen. Bob Gray, R-Pierre.

Clark is the highest-paid state employee. He got a $250,277 bonus a year ago.

The Investment Office manages $10 billion in state assets.

Many stock prices have plummeted in the past year, and that means there are bargains to be obtained in the market, Clark said. In the past, recognizing potential earnings trends has helped state investments far exceed the performance of other investment programs, he said.

"There are opportunities now that will allow us to do well in the future," he said.

"The key to our long-term success is that we don't flinch in the face of adversity," Clark said.

The Investment Office has earned $4 billion for the state retirement system in the past decade, he said, adding that kind of performance is unlikely in uncertain economic times.

Annual retirement system earnings are expected to be about 7.75 percent in the next decade, he said.

"The days of sustained double-digit returns are in the past," Clark said. "Return expectations should be muted, although earning around 8 percent isn't too bad."

Many employees in his office get annual raises of 10 percent to 20 percent until they get to the $150,000 to $200,000 levels, he said. Those workers could get much more if they went to work in the private investment sector, Clark said.

"We're paying them well enough that we hope to be able to keep them long-term."