U.S. public pension funds are cutting investment return assumptions because of years of zero interest rate policies and changing how they manage risk to avoid a repeat of the damage caused by the financial crisis.

The growing recognition that short-term volatility can have a devastating impact on mature pension plans in the $4 trillion sector could herald a sea change in the way public funds invest in the future.

Since the 2008 financial crisis about two-thirds of the 126 funds tracked by the National Association of State Retirement Administrators have lowered their expected return targets. The average expected return now stands at 7.68 percent versus 8 percent in 2008.

The financial crisis left a hole in public pension funds. The average state pension fund has only around 80 percent of the assets it needs to meet its liabilities, according to a 2015 survey by Wilshire Consulting, down from 95 percent in 2007.