Institutional Asset Management Shifts Toward Low-Correlation Hedge Funds

Institutional allocators are adding to hedge fund allocations again. On their third-quarter 2026 earnings calls on November 9, 2026, GCM Grosvenor (GCMG), Affiliated Managers Group (AMG) and Virtus Investment Partners (VRTS) all said clients are putting new money into hedge fund and absolute-return strategies that move less in step with stocks and bonds. GCM Grosvenor's hedge fund business has now taken in net new money for four straight quarters.[1][2][3]

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Why allocators are adding to hedge funds instead of holding the bucket flat

Pension funds, insurers and other large institutions usually set aside an "alternatives" allocation for strategies with low correlation to traditional stocks and bonds. Hedge fund and absolute-return strategies aim to make money whether markets rise or fall. Managed futures is one such strategy: it uses futures to follow price trends across asset classes, going long or short. AMG calls this group "liquid alternatives" because investors can get their money out more easily than from private equity.[4]

For a while, many institutions simply held this allocation steady. As late as February 2026, GCM Grosvenor was still budgeting for flat flows in its hedge fund business.[5] By the third quarter, it said new clients were awarding new mandates and existing clients were adding capital.[1] Virtus said a diversified portfolio needs strategies with less correlation to long-only traditional assets.[3]

The shift can spread across managers because the increase is decided at the level of an institution's asset-allocation budget, and the same budget is split among several managers. AMG said its affiliates benefit from an industry-wide increase in allocations to liquid alternatives, particularly to the largest managers.[2]

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Three firms report money returning to low-correlation strategies

GCM Grosvenor builds hedge fund portfolios for institutions. Fee-paying assets in its Absolute Return Strategies (ARS) business reached $28 billion at the end of the third quarter, up 18% year over year, with positive net flows for four consecutive quarters.[1] The firm expects net inflows again in the fourth quarter and said its ARS pipeline is the strongest in recent memory.[1] In February 2026 it had said plainly that it was not changing a budget built on flat flows.[5]

AMG owns stakes in several hedge fund managers. Its liquid alternatives business grew nearly 40% organically over the past 12 months, but most of that came from tax-aware strategies.[2] Excluding them, the rest of the business still grew 14%, which management attributed to institutional demand across several affiliates.[2] On its second-quarter call, AMG also said industry-wide net inflows into liquid alternatives over the prior three quarters were the highest since 2007.[4]

Virtus offers the weakest evidence. It said managed futures grew on performance and "certain changes in investor preference," but gave no flow figure. In the same quarter, it lost a $7 billion quality-equity mandate.[3] Taken together, the three firms support the direction of institutions adding to low-correlation strategies, while the size of that increase rests mainly on the GCM Grosvenor and AMG numbers.

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Fee-paying assets concentrate at large hedge fund managers and allocators

If the increase continues, two kinds of firms would see the most direct growth in fee-paying assets: managers that run hedge fund strategies themselves, and allocators that select and combine hedge funds for institutions. AMG's observation is that money leans toward the largest managers.[2] Traditional active equity managers may sit on the funding side, as Virtus's equity outflow illustrates, but the material does not show a direct causal link between the two.

The most recent test came in October 2026. A tech selloff forced crowded tech trades to unwind, and hedge funds posted sharp losses that month.[6] Over the same period, alternative funds also saw withdrawals and tighter redemption limits, but mostly in private-equity and private-credit vehicles.[7] If institutions keep adding after those losses, the allocation looks structural; if flows fade with performance, it looks more like chasing returns. The next checks are whether GCM Grosvenor's ARS business posts net inflows in the fourth quarter as expected, and how AMG's liquid alternatives flows look excluding tax-aware strategies.

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Companies exposed to this shift

• Blackstone (BX): Its BXMA unit builds hedge fund portfolios for institutions and faces the same allocation decision as GCM Grosvenor. On its second-quarter call, BXMA's assets reached a record $109 billion, up 21% year over year, its fastest organic growth in nearly 15 years; third-quarter figures are not in this material.[8]
• SS&C Technologies (SSNC): Its GlobeOp unit provides fund administration for hedge funds, so its volumes move with fund assets. In the second quarter, its hedge fund redemption index was about the lowest since 2009, and fund-administration assets had risen $581 billion over two years. If the increase continues, it may show up in this business.[9]

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Sources

[1] Drillr · GCM Grosvenor (GCMG) · 2026-11-09 · Q3 2026 earnings call

"ARS fee paying AUM was $28 billion at quarter end, up 18% year over year and an 11% compound annual growth rate since the end of 2023. ARS net flows have been positive for the last four consecutive quarters. We expect positive inflows in the fourth quarter of this year. Our ARS pipeline is the strongest it has been in recent memory."

[2] Drillr · Affiliated Managers Group (AMG) · 2026-11-09 · Q3 2026 earnings call

[3] Drillr · Virtus Investment Partners (VRTS) · 2026-11-09 · Q3 2026 earnings call

[4] Drillr · Affiliated Managers Group (AMG) · 2026-07-30 · Q2 2026 earnings call

[5] Drillr · GCM Grosvenor (GCMG) · 2026-02-10 · Q4 2025 earnings call

[6] Drillr · News search "Hedge Funds Reel From Tech Selloff and Market Shocks" · 2026-11-09 · News roundup

[7] Drillr · News search "Investors Pull Back From Alternative Funds" · 2026-11-06 · News roundup

[8] Drillr · Blackstone (BX) · 2026-07-23 · Q2 2026 earnings call

[9] Drillr · SS&C Technologies (SSNC) · 2026-07-23 · Q2 2026 earnings call

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