Institutions are pumping capital back into hedge funds at record levels now that returns have snapped back. But MassPRIM is saying: Let’s hold tight — even if this could cost them alpha. 

Rather than seek new relationships, the Massachusetts Pension Reserves Investment Management Board is doubling down on its existing hedge fund relationships. 

“In a nutshell, mega hedge funds are growing with tough terms, emerging stars are scaling fast,” Bill Li, PRIM’s director of portfolio completion strategies, explained at the board’s December meeting. In this new climate, he argues it’s better to reassess the terms with its long-term partners.

There are downsides to this contrarian position: PRIM could be missing out on some cheap alpha from rising stars that charge lower fees right when returns are soaring. However, this is a business decision rather than an investment one. 

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The $123 billion state pension system has built a reputation as a top hedge fund investor, with many of PRIM’s managers growing substantially over time. However, Li noted that the hedge fund landscape has shifted dramatically from when he joined the state plan a decade ago. Allocators have now built platform-like models to act more like “pod shops” (slang for multimanager hedge funds that hire independent teams — aka pods — to manage capital).

“As a result, now we often need to clarify that PRIM isn't a pod shop,” he said. “We don't trade in and out of managers. We are long-term partners.” 

This decision comes as the state’s $10 billion portfolio completion strategies — which made up about 8.6 percent of the total plan and are mostly hedge funds — are posting positive returns across the board. Over the past year, portfolio completion strategies rose 10.5 percent, while the hedge fund program was up 11.5 percent. 

It has been a record moneymaking year for hedge fund managers, with the managers on II’s Rich List making the most in the 25 years that the list has been published. Data from HFR show that global investors poured $115.8 billion into hedge funds in 2025, bringing total AUM to $5.15 trillion (surpassing $5 trillion for the first time). Global hedge funds gained $527 billion in performance-based alpha last year.