Horizon Scan for Private Investment Funds: Key Recent Legal and Regulatory Developments to look out for in the coming months (February 2026)

This horizon scan sets out the main legal and regulatory developments (not including tax) that European managers should look out for in the coming months. In our full analysis, we have categorised topics under the following headings: (i) sustainable finance (EU and UK); (ii) regulatory priorities (EU and UK); (iii) reform of the Alternative Investment Fund Managers Directive (AIFMD); (iv) UK financial crime; (v) accessing a broader pool of capital; and (vi) transparency reporting and impact on funds. We have discussed each topic and commented on issues we think are especially noteworthy.

The UK’s and EU’s parallel agendas of growth and competitiveness continue to be important, together with their focus on strengthening financial stability and mitigating systemic risk. These three themes from the topics covered in this horizon scan are noteworthy.

Theme one is operational implementation and, with it, increasing regulatory divergence. There are more of the initiatives under debate that track from policies in development to rollout, execution and practical application. Although many areas of the UK and EU regimes overlap, specific areas of divergence are coming to the fore. For instance, the removal of the legal requirement for the UK to implement and continue to ensure compliance with the Alternative Investment Fund Managers Directive (AIFMD), a result of the UK leaving the EU, gives HM Treasury (HMT) and the FCA the freedom to remove provisions required under the AIFMD. Importantly, neither the FCA call for input nor the HMT consultation on UK AIFMD reform issued in April 2025 contemplate or otherwise address changes of the types contained in the updates to the EU AIFMD (AIFMD2). In summary, the state of play of AIFMD reforms is as set out below.

• In the EU, AIFMD2 must be implemented by EU member states by 16 April 2026. EU managers will need to consider their existing funds and set-ups to identify where changes are needed – on internal policies, procedures and processes, investor disclosures, reporting processes and/or fund documentation. However, this is not the end of imminent changes, once the series of measures made under the European Commission (the Commission)’s Market Integration Package and its Savings and Investment Union (SIU) Strategy and Retail Investment Strategy are finalised, there will be further knock-on impacts on the EU AIFMD. Other initiatives lead to further changes to the AIFM regime, particularly for small and mid-sized AIFMs, such as the Commission’s consultation looking at ways to boost Europe’s venture and growth capital markets, recognising that there is scope to make the current regime more proportionate and effective.
• For non-EU managers the impact of AIFMD2 will be reduced compared to their EU counterparts, with the focus being on enhanced investor disclosures and reporting. That said, we would flag that for non-EU managers or non-EU funds established in jurisdictions on the EU anti-money laundering or tax blacklists, consideration will need to be given as to alternative arrangements to market into the EU.
• In the UK, output following the FCA’s April 2025 Call for Input and HMT’s consultation is expected, with the FCA’s response and proposed rule changes due, in the second half of 2026.

Theme two is the growth in number and pace of new initiatives. This is apparent despite the regulators’ commitment to simplifying regulation to achieve proportionality and inter-operability. A couple of examples from the UK and the EU are set out below. The EU packages are broad and substantive, with no definitive timelines as yet – so it will be important to monitor progress and anticipate impact.

In the UK:

• The FCA policy statement containing its final rules for the new Consumer Composite Investments regime, which replaces the PRIIPs and UCITS disclosure regimes.
• The FCA’s consultation reforming its client categorisation rules to give wealthy investors more access to investment opportunities and support the growth of capital markets.

In the EU:

• Progress in the EU’s Retail Investment Strategy (which contributes to the EU’s Savings and Investment Union (SIU)), including proposed changes to the EU “professional client” definition.
• A wide ranging set of proposals in the Market Integration Package (a cornerstone of the EU’s SIU).

Theme three is sustainable investing. This continues to be important for how the requirements for ESG-related information on investments is to be treated, in particular as the EU seeks to rationalise SFDR and improve the current regime and the UK pursues an agenda aimed at developing and modernising the UK’s sustainability framework. As the market evolves with the dynamics of sustainable finance legislation, managers often face challenges in how best to navigate investor demand and sentiment in this field with their assessments of SFDR classification, disclosures and good governance practices. Alongside this, we are seeing increased attention on the interaction of sustainable investing and the financing of the defence sector. The EU’s June 2025 publication of the Defence Readiness Omnibus includes a package of measures designed to clarify and confirm the regulatory treatment of sustainable finance investment “aimed at establishing a defence-readiness mindset across the EU.” Although the FCA has confirmed that its sustainability rules do not prevent defence finance or investment, there is currently nothing akin to this EU package on defence investment in the UK.

Download our comprehensive analysis: Horizon Scan for Private Investment Funds (February 2026).