Blackstone on hedge funds: Why multi-strats are back

PodcastMaking SenseJoe DowlingOct 13

Multi-strategy hedge fund AUM reached an estimated $595 billion at the end of 2025, with growth driven by both performance and inflows. A Blackstone executive links rising institutional demand to a changed stock-bond correlation regime, while guests point to the funds’ historical returns, risk controls, and role in portfolios. The discussion also weighs the industry’s competitive advantages and capacity against high investor costs, and considers expansion into external allocations, additional asset classes, and less-liquid strategies.

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Key Takeaways

Multi-strategy hedge fund AUM reached an estimated $595 billion at the end of 2025, up $92 billion, or 18%, with $61 billion from performance and $31 billion from inflows—the largest annual increase since tracking began in 2020. A Blackstone executive says these funds grew 16% over five years versus about 4% for the rest of the industry, linking institutional demand to a period in which stock-bond correlation has risen since 2022.

A guest cites the Pivotal Path Multi Strategy Index’s nearly 30-year record of 9% returns with less than 5% volatility, versus equities’ 8% return and 15 volatility and bonds’ 3% return and 6 volatility, to argue that multi-strategy funds can serve as core holdings. Another guest notes that investors generally remain underweight despite some Ivy League endowments allocating 20%, and points to capital protection during major dislocations such as 2008; the same guest says a 60/40 portfolio had seven down quarters in the prior five years.

The prevailing multi-strategy model can involve 100 or 200 teams, often using equity long-short strategies, with risk models and leverage converting low returns on assets into higher returns on equity; pass-through fees help pay portfolio managers. A speaker says leading firms also use factor-neutralizing portfolios and stop-loss approaches, alongside talent, data, and trading infrastructure, to reduce correlation and volatility and support compounding.

TECHNOLOGY

Platform Differentiation — A guest argues that hedge fund platforms’ large footprints can make it harder for them to differentiate as they become the market in hedge fund trading. Continued evolution in capital deployment, investment strategies, data use, and AI could allow some platforms to pull further ahead.

“I think one of the challenges with their success and their very large footprints today is it becomes naturally harder to make sure you're doing something differently than the others…”—

MARKETS

AUM Growth — The host reports that multi-strategy hedge fund AUM was estimated at $595 billion at the end of 2025, up $92 billion, or 18%, year over year. Performance contributed $61 billion and new inflows $31 billion—the largest AUM increase recorded since tracking began in 2020.

“And according to the space in terms of size, as we see it expressed in assets under management is estimated to be $595,000,000,000 at the end of twenty twenty five…”—

Correlation Shift — A Blackstone executive says stocks and bonds have been more correlated than investors expect: their correlation averaged 62% over the past 50 years and has risen since 2022. The executive argues that volatility and deglobalization have increased the appeal of multi-strategy funds as a source of diversification from stocks and bonds.

“I think, fundamentally, that the demand for multi strats, and the demand for multi strat solutions stems from the underlying problem, which is that stocks and bonds are correlated a…”—

Relative Growth — A Blackstone executive says multi-strategy assets grew 16% over five years, compared with about 4% for the rest of the hedge fund industry. The executive links institutional demand for multi-strategy solutions to the changed correlation regime facing traditional portfolios.

“If you zoom out, I think over the last five years, it's 16%. Yes. And that's compared to the rest of the industry at around 4%…”—

Multi-Strategy Fund Growth

The host introduces Blackstone’s multi-strategy leaders and reports that the sector reached an estimated $595 billion in assets, with recent growth fueled by performance and inflows.

Stock-Bond Correlation Shift

The guests connect institutional interest in multi-strategy funds to a changed correlation regime, volatility, and demand for diversification beyond traditional stock-and-bond portfolios.

Returns And Portfolio Role

The guests argue that investors are underallocated to multi-strategy funds, citing long-term returns with comparatively low volatility and their potential as a core portfolio holding.

Platform Moats And Tradeoffs

The discussion weighs capacity, fees, liquidity, and transparency against established platforms’ advantages in recruiting, technology, leverage, and risk management.

BXMA’s Multi-Asset Model

Riyad describes BXMA’s internal strategies and external manager partnerships as an alternative model intended to combine diverse sources of return with scale and investor access.

Multi-Strategy Innovation

The guests point to rising external allocations, expansion into commodities and private credit, and innovations in central books, AI, and portfolio construction.

Pass-Through Fee Mechanics

Riyad explains how pass-through structures shift operating expenses and portfolio-manager compensation to investors, reducing the share of returns they retain.

Technology And New Capacity

The guests say technology, risk management, and AI may distinguish future winners, while managers could apply their capabilities to less-liquid strategies as capacity expands.