Geographically, Haverhill and Lawrence are Massachusetts neighbors, but they are worlds apart when it comes to the performance of their retirement funds.

Haverhill’s $165.4 million fund has consistently outperformed all or most of the state’s 106 separate pension funds. Lawrence’s $124.5 million fund is consistently near the bottom.

In the past five years, Haverhill’s return on investments has averaged 10.19 percent per year, compared with Lawrence’s 7.4 percent.

The difference is significant because the more the fund earns, the less local taxpayers have to pay for pensions promised to public employees. Lawrence’s weak investments cost millions.

A study last year by the Pioneer Institute found that taxpayers will have to cover $3 billion in lost revenues because of poorly performing pension funds like Lawrence’s.

The average local retirement system holds $150 million, according to the Pioneer Institute, so a 1 percent difference in the return on investment is worth $1.5 million.

Haverhill officials sing the praises of the Haverhill Retirement Board, the five-member group that manages the high-performing fund for 2,200 current and retired employees.

That hasn’t always been the case. Four years ago, the board was embroiled in scandal when it was revealed its chairman, Vaughn Guertin, had traveled the world and the United States on business for the board, including 304 days when he was also being paid as a Fire Department captain.

Guertin, who left the board and moved two years ago, today is given much of the credit for the pension fund’s success.

“Investing comes down to making good decisions and having diversity, and obviously (Guertin) excelled in those areas,” said Mayor James Fiorentini, who as a city councilor in 2002 led the charge against Guertin’s globe-trotting — Vietnam, Switzerland, Australia and Northern Ireland were among his stops.

The scandal led the board to rewrite its travel rules to curb expenses, improve oversight and ban trips paid for by money managers who did business with the board.

The fund’s performance remains strong, though it lagged behind the state’s massive $50 billion fund last year, earning 14.6 percent, compared with the state’s 16.7 percent. In some years, Haverhill has done better than the state.

William J. Klueber, the board’s current chairman, said the fund’s performance is the result of three things: a good financial consultant, good financial managers with different areas of expertise, and investment diversity.

“Diversity would be my No. 1 advice,” said Klueber, who retired as city auditor in 2001. “You can’t invest too heavily in one area like oil or gold because you may make a killing for a while, but it always comes back the other way. Whether it’s a large retirement fund or an individual 401(k), it’s OK to have some risky investments as long as you’re diverse.”

He cited the example of Clinton, in central Massachusetts, home of the top-performing public pension fund in the state last year, with earnings of 18 percent.