The non-uniform distribution of memory accesses among the cache sets results in some sets being used heavily while certain others remaining underutilized. Dynamic associativity management (DAM) is a technique to allow the heavily used sets to distribute their load among the lightly used sets thus improving the overall utilization of the cache. CMP-SVR is a previously proposed DAM based technique, where each set is divided into two sections: normal storage (NT) and reserve storage (RT). Some number of ways (25 to 50 percent) from each set are reserved for RT and the remaining ways belong to NT. The sets are divided into groups called fellow-groups and a set can use the reserve-ways of its fellow sets to increase its associativity during execution. Though CMP-SVR improves performance the formation of its fellow-groups is static: once created it never changes. It has been observed that some fellow-groups have more number of heavily used sets than the other fellow-groups. As a result the cache loads are not uniformly distributed among the fellow-groups. Also the behavior of sets changes dynamically: a lightly used set may become heavily used after a number of execution cycles. This paper studies the behavior of each set in detail and proposes a DAM based technique which improves the performance compared to other DAM based techniques. The proposed technique called FS-DAM dynamically creates fellow-groups based on the current set loads ensuring that the heavily used sets are evenly distributed among all the fellow-groups. Such distribution increases the utilization of the cache and hence improves performance. Full system simulation shows an average of 6.62 and 16.74 percent improvements, in FS-DAM as compared to CMP-SVR, in terms of CPI (Cycles Per Instruction) and MPKI (Miss Per Thousand Instructions) respectively. Comparing with Z-Cache the improvements are 6.21 percent (CPI) and 14.65 percent (MPKI). The proposed policy also shows better performance over V-Way and SBC.