Horizon Scan for Private Investment Funds: Recent Developments and What to Look Out For (May 2026)

This horizon scan highlights the principal legal and regulatory developments (excluding tax) that European managers should monitor over the coming months. In our full analysis, we have grouped topics under headings, commented on issues we think are especially noteworthy, and included a note, highlighted in red, for each topic to indicate any new topics or material updates since the previous edition of our horizon scan (published in February 2026).

We have set out below headline points on recent developments that we would flag, followed by three overarching themes that emerge from the developments covered in this horizon scan.

Recent Developments of Interest 
(using the headings from our full analysis)

Sustainable finance (EU and UK): continued growth in impact-linked carried interest structures, where a portion of the manager’s carry is contingent on achieving defined sustainability outcomes; the European Parliament Rapporteur’s draft report on the European Commission (the Commission)’s SFDR2 proposal; and publication of the final UK Sustainability Reporting Standards.

Regulatory priorities (EU and UK): increasing calls to accelerate adoption of the Market Integration and Supervision Package (MISP) under the Savings and Investment Union (SIU) Strategy. The Commission recently consulted on potential reforms to the regulatory regimes governing venture and growth capital funds (in the UK this may track with its separate proposed re-calibration of thresholds of AIFMs on the output of the reform of UK AIFM rules, pending a review of the RVECA and SEF regimes).

Reform of the Alternative Investment Fund Managers Directive (AIFMD): following the deadline for member state implementation of AIFMD2, focus has shifted to practical compliance considerations. In the UK, consultations from the FCA and HM Treasury on reforms to the AIFM regime are expected in July. With the AIFMD2 changes in the EU and likely changes to the UK AIFM regime, the two regimes are likely to diverge even further than is currently the case.

UK financial crime: the Crime and Policing Act 2026, which received Royal Assent on 29 April 2026, expands the range of offences for which companies may be held liable based on the conduct of senior managers.

Accessing a broader pool of capital: in the UK, the Pension Schemes Act 2026 introduces measures from the Pensions Investment Review aimed at facilitating investment. In the US, proposed Department of Labor guidance under ERISA encourages defined contribution plans to consider alternative investments, alongside a process-based safe-harbour offering fiduciaries a “presumption of prudence” where specified factors are properly assessed and documented.

Transparency reporting and impact on funds: the Finance (No. 2) Bill 2026 introduces mandatory registration requirements for tax advisers interacting with HMRC, with implementation for financial services expected from 1 April 2027; firms should monitor whether they fall within scope. Also of interest on AIFMD reporting is ESMA’s final report on the integrated collection of fund data. ESMA propose a centralised reporting framework with harmonised definitions and templates, supplemented by targeted modules addressing specific fund characteristics and supervisory priorities (such as leverage and liquidity in AIFs).

Overview Thematic Points

The UK and EU’s parallel agendas of promoting growth and competitiveness remain central, alongside a continued focus on financial stability and the mitigation of systemic risk. Three overarching themes emerge.

• Operational implementation and increasing regulatory divergence. A notable shift is the transition of many initiatives from policy development into implementation, execution and practical application. As this occurs, areas of divergence between the UK and EU regimes are becoming more pronounced. A key example is the evolution of the AIFMD framework. Following the UK’s departure from the EU, HM Treasury and the FCA have flexibility to depart from the AIFMD regime. The FCA’s April 2025 Call for Input and HM Treasury’s consultation on UK AIFM reform did not propose changes equivalent to those introduced under AIFMD2 in the EU, indicating a potential widening of divergence over time. AIFMD2 is unlikely to be the final stage of reform. Further changes are expected as related initiatives under the Commission’s MISP under the SIU Strategy and Retail Investment Strategy progress. In addition, targeted initiatives, such as the Commission’s work on enhancing venture and growth capital markets, may lead to further adjustments, particularly affecting smaller and mid-sized AIFMs.
  
  

  In summary, the current position on AIFMD reform is as follows:

  • EU: Member states were required to implement AIFMD2 by 16 April 2026. EU managers continue to focus on operational readiness and embedding changes across policies, procedures, investor disclosures, reporting frameworks and fund documentation. The pivot points have been: (i) loan origination rules and how they might apply (including if any transitional provisions apply); and (ii) for open-ended AIFs, how liquidity management tools apply and timing of implementation.
  • Non-EU managers: The direct impact of AIFMD2 is more limited, primarily affecting enhanced disclosure and reporting obligations. However, non-EU managers and funds will want to monitor fund domiciles for marketing purposes to ensure that there are no issues with high-risk jurisdictions/tax blacklists.
  • UK: Further clarity on the UK AIFM regime is still awaited. The FCA’s response to its Call for Input, including any proposed rule changes, is anticipated in July 2026, alongside HM Treasury’s next steps. The direction of travel suggests a more tailored UK framework, with potential simplification in some areas.
• The continued growth in the volume and pace of regulatory initiatives. Despite stated regulatory objectives of simplification, proportionality and interoperability, both UK and EU policymakers continue to advance a significant pipeline of reforms, illustrated by the announcement in the 13 May 2026 Kings Speech on a new Enhancing Financial Services Bill (the detail of which is covered in our full analysis), representing a broader push to make UK regulation more growth-focused. Many of these initiatives are broad in scope and, particularly in the EU, remain subject to evolving timelines, requiring ongoing monitoring.
  
  

  Illustrative examples, the details and updates of which are expanded on in our full analysis, include:

  • UK:
    • The FCA’s final rules for the Consumer Composite Investments (CCI) regime, which will replace the PRIIPs and UCITS disclosure regimes.
    • Proposed reforms to client categorisation rules aimed at widening access for high-net-worth and sophisticated investors and supporting capital markets growth.
  • EU:
    • The MISP, a cornerstone of the SIU, comprising a wide-ranging set of legislative proposals designed to deepen EU capital markets.
    • The Retail Investment Strategy introduced three years ago, including proposed amendments to the definition of “professional client”.

Sustainable investing and the continued evolution of ESG frameworks. Sustainable investing remains a key area of regulatory focus, although the direction of travel is increasingly towards consolidation and clarification. In the EU, this is reflected in efforts to rationalise the SFDR framework and improve its usability. Work is underway progressing SFDR2, although there is still a way to go before we are likely to see the final SFDR2 framework take shape. In the UK the focus remains on developing and implementing a more coherent sustainability disclosure regime. Managers continue to face practical challenges in aligning investor expectations with regulatory requirements, particularly in relation to SFDR classification, disclosures and governance standards.

A further emerging area is the intersection of sustainable finance and defence investment. The EU’s Defence Readiness Omnibus (published in June 2025) seeks to clarify the treatment of defence-related investments within sustainable finance frameworks and to support a broader “defence-readiness” agenda. While the FCA has confirmed that UK sustainability rules do not preclude investment in the defence sector, and its annual work programme 2026/27 includes prioritising defence-focused funds for authorisation, there is currently no equivalent, comprehensive UK initiative in this area.

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