Alternative Asset Management & Sustainability Insights

Reform in name only: The FCA's proposals recycle large portions of EU-derived rules into new British ones. For larger managers, the regulatory burden will feel much the same.
Small managers, bigger burden: The firms the reforms claim to help — smaller managers and new market entrants — may face more rules, as they will fall within a detailed regulatory framework for the first time.
A missed strategic opportunity: Brexit was a chance to design a competitive, ground-up framework for asset management to attract international businesses to the UK, but the FCA has failed to seize it.

Links:
quarterly-statistical-release-q1-2026.pdf
CP26/28: The UK AIFM Regime
quarterly-statistical-release-q1-2026.pdf

Key Insights:
Policy calm, but fragile: The UK government has engaged constructively with the private capital sector since 2024, but the incoming administration's intentions on capital gains tax and wealth taxes remain unclear.
Tax disputes an increasing headache for businesses: The UK tax authority's escalating scrutiny of executive remuneration – reflected in high-profile court victories and an apparent jump in investigations – is presenting financial and operational challenges for the private capital sector.
Asymmetry favours the agency: HMRC dictates the pace, scope and terms of enquiries.
Links:
https://www.ft.com/content/6b8cd156-c5bb-4cce-8c54-818fd19fab96?syn-25a6b1a6=1
https://www.traverssmith.com/knowledge/knowledge-container/the-uks-carried-interest-tax-regime/
https://www.traverssmith.com/knowledge/knowledge-container/uk-government-proposes-reform-of-taxation-of-llc-members/
https://www.traverssmith.com/knowledge/knowledge-container/all-change-for-uk-aifmd

Sustainability issues are manageable: Policymakers and industry initiatives are clearing sustainability obstacles, but – although vital – these are usually not the main obstacle to defence investment in Europe.
Due diligence challenges remain: Human rights and end-use risks cannot be fully eliminated, and governments and investors need to work hard to manage them.
Commercial hurdles persist: The real barriers are commercial: for example, slow procurement, unclear demand signals, and lack of long-term contracts.

Links:
https://www.investeurope.eu/publications-policy/publications/2026/model-limited-partnership-agreement-lpa-language-for-defence-dual-use-investment/
https://eiriscrn.net/grid/
https://www.rusi.org/explore-our-research/publications/insights-papers/private-capital-uk-defence
https://www.ft.com/content/72878c3e-a4c6-4e4d-86c1-6df11593e4ac?syn-25a6b1a6=1
https://www.gov.uk/government/publications/the-defence-investment-plan
https://www.traverssmith.com/knowledge/knowledge-container/backing-british-can-the-uk-become-the-leading-destination-for-defence-investment/

Alternative Insights Summit 2026: In London last week, Travers Smith's clients and friends convened to discuss the key issues of the day in the private markets.
Increasing access to private market returns: One theme was the need for UK pension funds to take more advantage of the returns available, while sponsors should approach the wealth market with transparency, good governance – and without over-reliance on potentially fickle capital.
Defence is a vital opportunity: With Europe on a war footing, defence offers compelling returns across technology, infrastructure and supply chains – but government must provide faster procurement, clearer contracting and stronger demand signals to mobilise private capital at scale.

Links:
https://www.traverssmith.com/knowledge/events-container/alternative-insights-summit-2026/

Investors must face reality: A new report argues that a decade of disclosure targets and stewardship has failed to drive real-world decarbonisation, because technology development and government policy – not investor pressure – are the primary determinants of how quickly economies transition.
Private markets have real advantages – but clear limits: A sponsors' greater agency over portfolio companies gives private markets a genuine edge, but fiduciary duties mean no manager can pursue climate goals unless it is in the interests of their LPs or consistent with a specific mandate.
Policy engagement is the under-used lever: Private markets managers – closer than most to what makes a project financeable – are well placed to tell governments what conditions will attract private capital, and that expertise could be deployed more deliberately, and more often.

Links:
https://www.fmg.ac.uk/sites/default/files/2026-05/What-Can-Investors-Do-About-Climate-Change_final.pdf
https://www.edf.org/
https://www.lse.ac.uk/global-school-of-sustainability
https://collaborate.unpri.org/group/761/about
https://www.bain.com/how-we-help/private-markets-decarbonization-roadmap/