Maybe they got the memo: After years of sometimes-

embarrassing experiments with high-fee exotic investments, the underfunded Pennsylvania and Philadelphia pension systems, like a lot of small retirement savers, are doing what some readers of this column have long suggested:

They are putting more of their money into index funds in general, and U.S. stock index funds in particular.

Unlike Montgomery County, which famously fired its diverse and costly list of money managers in 2014 and gave most of its pension assets to locally based indexers at Vanguard Group, the larger state and city funds have hired big out-of-state index managers, who turn out to be as cheap as Vanguard.

Pennsylvania's State Employees' Retirement System last month voted to hire "passive managers," or index funds, for 85 percent of its U.S. stocks, up from 65 percent last year. Passive index-fund managers don't pay humans to make buy or sell decisions on each stock. Instead, they buy and hold every stock in the S&P 500 or other popular stock indexes.

SERS is also boosting its total stock investments to 43 percent of its $26 billion in assets, from 39 percent last year, while cutting back on high-fee private-equity investments.

To manage the additional "passive" billions, SERS has increased its contract with Mellon Capital Management, the San Francisco- and Boston-based firm that charged just $300,000 - or 1 percent of 1 percent - to manage nearly $3 billion SERS had invested in Mellon's Russell 1000 Index fund last year.

Mellon manages additional SERS funds in the Russell 2000 Growth and Value Index funds.

In all, about 31 percent of SERS is "passively managed," a rate that should rise to 35 percent when planned changes are in force, spokeswoman Pamela J. Hile told me.

SERS isn't abandoning more exotic or expensive investments, however.

Even as it gives more cash to Mellon and cuts back on private equity, it's also planning to boost investments with Lancaster-based Emerald Asset Management, which last year charged $2.13 million, or almost 0.5 percent, to manage about $432 million in state investments in Pennsylvania-based and smaller-cap stocks.

SERS also plans to hire a lot more hedge funds, boosting its investments in the lightly regulated, high-fee investment pools by one-third, to 12 percent of its total.

As far as hedge funds go, Philadelphia is doing the opposite.

Instead of hiring more, the city has fired most of its hedge-fund managers, including Apollo Global - whose partners include lead Sixers owner Josh Harris - after Apollo lost millions for the city, and other hedge funds failed to justify their high fees, dragging the pension system's performance below the level of the state fund.

At the same time, Philadelphia is, like the state, moving other pension assets toward index funds.

Philadelphia has sent more millions to Rhumb Line LLC, a Boston firm that specializes in large institutional investors like pension plans. (A rhumb line is a simple ship's course, not as exact as other routes but easier to calculate from start to finish.)

Rhumb Line now manages more than one-third of the city's $4.3 billion pension system. With other index-fund managers, including Northern Trust Co. of Chicago, nearly half of Philadelphia's pension assets are now indexed.

For its largest indexed account, tied to the Russell 1000 stock index, Philadelphia pays Rhumb Line just 2 basis points a year, the same as Vanguard's advertised fee for its flagship S&P 500 Index fund for investors Philadelphia's size.

"The pricing is competitive," Chris DiFusco, chief compliance officer for the city pension system, told me. Also, Vanguard was unable to accommodate Philadelphia law barring gun and tobacco stocks, Francis Bielli, executive director of the city pension system, told me.

Will Philadelphia keep firing investment-pickers and replacing them with programmed index managers? "If an active manager isn't adding value, net of fees, Fran and the staff will continue recommending the board transfer [assets] to passive managers," DiFusco said.

For pension managers, the chase after exotic results has followed years of unusually low bond rates that forced investment officers to search harder for profits that will help keep the funds from going broke.

If the Federal Reserve keeps slowly raising rates - and if incoming President Donald Trump makes good on his promises to cut income taxes for rich people and corporations while boosting military, highway, public works, and Homeland Security spending, which also likely means higher rates - won't that mean better returns for pension plans and other savers?

"Our advisers have that on our radar," Bielli said. "We feel positioned to take advantage of any changes."

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@PhillyJoeD