(Bloomberg) -- New York City’s pension for civil employees voted to exit its $1.5 billion portfolio of hedge funds and shift the money to other assets, deciding that the loosely regulated investment pools didn’t perform well enough to justify the high fees.

The action Thursday by the trustees of the $51 billion Employees Retirement System, known as NYCERS, may signal a growing willingness among public pensions to pull their money from the investment vehicles, whose highly paid managers have become a political lightning rod and have frequently failed to outperform.

In September 2014, California’s Public Employees’ Retirement System, the largest U.S. pension, divested its $4 billion portfolio saying it cost too much and was too small to affect its overall returns.

NYCERS invested with hedge funds “with the belief that these would add value to the performance – both by increased returns and decreasing risk by providing downside protection,” New York City Public Advocate Tish James said in a statement. “I have seen little evidence of either.”

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The New York fund’s decision will remove assets from firms including D.E. Shaw & Co., Brevan Howard Asset Management, and Perry Capital. Last year, NYCERS’s hedge fund portfolio lost 1.88 percent, lagging both the Standard & Poor’s 500 Index and the Barclays U.S. Aggregate Bond Index. Three-year returns were 2.83 percent.

Hedge funds eked out returns of about 0.6 percent in 2015, when the S&P 500 slipped 0.7 percent, according to data compiled by Bloomberg. That was the first time the funds had outperformed the index since 2008 as share prices rallied.

NYCERS’s hedge fund investments were subject to intense political scrutiny. Last year, New York Mayor Bill de Blasio referred to funds that bought Puerto Rico’s bonds as ”predators" because they demanded cuts in spending and services to ensure they’re paid in full. Two of NYCERS hedge fund managers held some of Puerto Rico’s $70 billion debt. Hedge fund managers have also come under fire for supporting charter schools, which are privately run but funded with taxpayer money.

Hedge funds still manage money for New York City’s pensions for firefighters and police officers. The city’s teachers’ and education administrators don’t invest with hedge funds.

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NYC pension votes to scrap $1.5B hedge fund portfolio

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