Managers of San Diego County's pension fund took an extraordinary measure Thursday to free up cash as tumbling stock market prices diminished its reserves.

The board that monitors the fund voted unanimously to discontinue an investment strategy, a move that will keep $100 million in its cash reserves.

"This is historic. In my 20-year history, I have never asked for this kind of emergency authority," said David Deutsch, chief investment officer for the pension fund, in an interview after the meeting. "And to tell you the truth, when I woke up this morning, I didn't know I was going to do this."

The pension board's action was needed after the Standard & Poor's 500 index of stocks fell 5.9 percent Wednesday, putting the pension's investment funds at risk, Deutsch said. He estimated that, at that level, an additional 10 percent decline in the index would leave the $7.3 billion pension fund with just $25 million in cash for investments, excluding its benefits reserve.

The index fell 6.7 percent Thursday. Before that decline, the pension fund had about $100 million in reserves. The board's decision altered a strategy that required the pension fund to plow money into stocks if their value fell below a fixed percentage of the fund's overall portfolio.

The strategy is similar to one pursued by many individuals who strive to keep their 401(k) retirement funds divided into stable portions of stocks, bond and cash.

For the pension fund, Wall Street turmoil has forced its managers to abandon part of their investment strategy out of concern that purchasing more stocks would put its cash reserves at dangerously low levels. If that happened, the fund might have to sell assets, which would guarantee significant losses rather than being able to wait for a market return.

"To put it bluntly, the strategic policy overall is a sophisticated policy that we don't need right now," Deutsch told the board.

Also at the meeting, the board voted to increase Deutsch's salary by 4.3 percent to $209,000, based on the fund's strong performance over the last fiscal year. Loretta Morris, a trustee on the board, was the only member of eight present to vote against the raise.

Over the last fiscal year, the pension fund outperformed the overall market, posting an investment gain of 1.5 percent while stock indexes fell 15 percent or more. But from July through September, the pension fund did worse than several Wall Street benchmarks, losing a huge chunk of its value, $1.1 billion.

That portfolio valuation did not account for October, the month that saw the biggest decline in stocks.

The reversal of fortune for the fund was due largely to its hedge fund investments, Deutsch said. Hedge funds are private investment vehicles used by large investors.

Deutsch told the fund's board it should consider drawing down its hedge fund investments when the board next meets in December.

Consultants who advise the board on its hedge fund investments also gave a presentation during Thursday's meeting, saying the county's hedge funds are facing withdrawals as worried investors pull their investments. The practice tends to force hedge funds to sell assets and lose value.

That development presents an interesting proposition: The pension fund could continue to lose money, but with cash on hand it could also take advantage of well-valued stocks, said consultant John Claisse with Albourne America.

"We're not out of the woods completely, but also at this stage there are attractive areas of opportunity," he said.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at www.nctimes.com/blogs/minding_your_business.