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

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

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

NYCERS invested with hedge funds “with the belief that thesewould add value to the performance – both by increased returns anddecreasing risk by providing downside protection,” New York CityPublic Advocate Tish James said in a statement. “I have seen littleevidence of either.”

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

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

NYCERS’s hedge fund investments were subject to intensepolitical scrutiny. Last year, New York Mayor Bill de Blasioreferred to funds that bought Puerto Rico’s bonds as ”predators"because they demanded cuts in spending and services to ensurethey’re paid in full. Two of NYCERS hedge fund managers held someof Puerto Rico’s $70 billion debt. Hedge fund managers have alsocome under fire for supporting charter schools, which are privatelyrun but funded with taxpayer money.

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

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