{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.text}}
1. M&A in Asset Management could accelerate in 2026, primarily from GP stake sales and non-alternative financial institutions
Asset management is emerging as an important convergence point of three macro themes: asset growth, investment liquidity, and tax strategy. In 2026, we expect the asset management M&A landscape to experience changes in the control of large alternative managers, GP-stake transactions, and strategic acquisitions and partnerships by large, non-alternative institutions.
Recent public announcements point in the same direction: financial institutions are seeking greater control over the platforms that help drive long-term performance and influence in private markets. At the same time, GP-stake investors and alternative managers are evolving their playbooks in response. We’re seeing more hybrid structures where minority stakes are paired with long-dated distribution agreements, and partnerships between alternatives platforms and retirement investment providers aim to open private markets to individual traders and defined contribution capital.
These arrangements reflect a shift toward strategic, ecosystem-oriented partnerships. For example, a traditional financial institution acquires a minority stake in a private-markets platform to gain access to evergreen products, or a GP-stake manager partners with a retirement recordkeeper to build private-market options for 401(k) plans. These deals are about distribution, product design, and long-term alignment of capital and economics.
$1 trillion is the potential AUM value of a 5% allocation to private markets in US defined contribution assets by 2030.
Source: PwC analysis. Estimate is illustrative and reflects PwC’s baseline scenario assumptions regarding a 5% allocation to private markets within U.S. defined contribution plans by 2030.These trends have direct implications for deal pricing, integration, and tax. Strategic incumbents moving into asset management are often paying for scale, brand, and distribution. But they’re also focusing on structures that enhance after-tax returns on management fees, performance fees, and co-investments across multiple jurisdictions. GP-stake players, in turn, are competing and collaborating with strategic investors, reevaluating how they value fee streams, structure governance rights, and support their GPs’ own liquidity solutions. For managers, in the next wave of private capital, your choices about who owns your management company, how you tap retail and defined contribution channels, and how you structure cross-border platforms will increasingly be judged not just on IRR, but on the resilience and tax-efficiency of those economics over time.
Profit per dollar of assets is under pressure: profit as a share of AUM has already fallen roughly 19% since 2018, and PwC projects another 9% decline by 2030 – even as global AUM are expected to climb from about US$139.9tn to US$200.4tn.
2. Retailization could force a rethink of fund structures, tax assumptions, and operational models
As private market strategies expand from reliance on institutional investment to individual investors, the traditional fund playbook needs modernizing. The structures, processes, and tax assumptions that worked for a concentrated base of sophisticated institutional investors are often inadequate for retail investors that have different expectations around liquidity, holding periods, reporting, and customer experience. Let’s explore these dynamics—how you can manage the investor gap, why the fund lifecycle and investor alignment is critical for success, and how tax-focused operations should be embedded across the firm’s ecosystem.
Even as managers broaden access to individuals, we are seeing that many of the same institutional investors are showing renewed interest in these products, often as anchor investors in new vehicles or as ongoing participants alongside retail capital. So, the larger story is less a shift away from institutions and more an evolution toward a blended investor base. However, that blended base can introduce practical, non-tax structuring and commercial constraints as well, particularly the challenge of matching fundraising with deployment in retail channels (and especially in 401(k) settings). Some institutions may seek additional protections or conditions when investing alongside retail in the same vehicle.
The alignment of the investor, the investment, and the fund lifecycle
Bringing retail investors into private markets introduces a new set of tax considerations across each stage of the investor and fund lifecycle. At the outset, investor onboarding requires careful attention to the tax documentation and reporting expectations of different investor types. During the investment period, managers should account for allocations of income and expenses, withholding obligations, multistate tax exposure, and the treatment of any international investments—all of which can introduce operational complexity if not planned for in advance. On the fund-operations side, managers face requirements around distribution policies, earnings and profits calculations, and potential exposure to ECI and UBTI for certain investors. Finally, at the exit or redemption stage, the fund should manage gain or loss recognition, distributions, and the correct allocation of tax attributes. For retail-facing products, this lifecycle often becomes a core design element because investors expect clarity, consistency, timeliness, and predictability in their tax reporting. When managers design with these tax dynamics in mind, they create retail products that can scale more efficiently and support a consistent, investor-friendly experience.
Managing the investor gap
As retail investors gain greater access to private-market strategies, a clear gap is emerging between institutional-style fund structures and the liquidity, minimums, and tax simplicity that individuals require, which is creating an opening for new vehicle designs. Retail buyers are accustomed to straightforward reporting, typically via Form 1099s from mutual funds or ETFs, and they may lack the tax sophistication or the desire to manage the complexity, timing, and multistate filing obligations that often accompany Schedule K-1s from pass-through structures. This disconnect creates a structural gap: managers want to tap retail demand, but retail investors tend to participate at scale when offerings are designed to meet their requirements for simplicity, predictability, and clarity. Closing this gap requires managers to revisit investment structuring and selection, balance tax efficiency against reporting ease, communicate transparently about tax implications, and invest in technology-enabled processes capable of supporting a large and diverse investor base. They must identify which specific retail segment they’re targeting, whether it’s affluent investors en masse seeking a steady income or high-net-worth individuals looking for differentiated return streams.
Embedding the tax function into operations
Successfully serving retail investors requires the tax function to be embedded deeply into the ongoing operations of the fund and not treated as an afterthought. Retail vehicles often operate with frequent valuation cycles, periodic liquidity windows, and a broader and more diverse investor base, which demand institutional-grade tax integration and operations. From a valuation and net asset value (NAV) perspective, managers should maintain detailed accounting and track embedded gains and losses that may affect both returns and tax outcomes.
At the cash-management level, funds should balance meeting investor redemptions with maintaining tax efficiency, enabling liquidity decisions that do not inadvertently create taxable events or distort allocations. And because retail funds may have thousands of investors with varying holding periods and tax situations, allocation methodologies should be precise, defensible, and operationally scalable. Embedding tax into these operational processes allows managers to deliver the transparency, consistency, and reliability that retail investors expect, while also reducing operational risk and improving the sustainability of the fund structure over time.
3. Portfolio companies are staying private longer, reshaping exits through continuation funds, secondary transactions, and preferred equity deals
Over the past 20 years, median US private equity holding periods have lengthened by roughly 50%, increasing from about four years in the mid-2000s to approximately six years today.
Source: PitchBook.
As private equity portfolio companies stay private for longer periods, the traditional exit pathways that defined the private equity (PE) lifecycle are fraying. Valuation gaps, public equity market volatility, and constrained buyer appetites contribute to a slower, more uncertain PE exit environment. Sponsors and limited partners are looking for new ways to generate liquidity, manage fund durations, and continue supporting portfolio companies without relying solely on long-dated hold periods or unpredictable market windows. Distributed to paid-in capital (DPI) versus IRR is the new standard for which limited partners are judging GPs.
Continuation vehicles and other GP-led secondaries are mainstream tools that allow sponsors to extend ownership of assets while giving existing limited partners (LP) a choice between rolling forward or taking liquidity. Preferred-equity financing and NAV-based credit facilities are also evolving rapidly, offering managers flexibility in returning capital, funding growth, or bridging timing gaps without forcing a full company sale. These structures provide optionality for sponsors, LPs, and management teams who want to participate in future value creation while addressing near-term capital needs.
4. ‘Tax alpha’ can be a motivating factor for LPs in evaluating a GP’s effectiveness
Investors are becoming more intentional about the tax consequences of where and how they allocate capital. In conversations with wealth advisors and fund sponsors, tax considerations are a primary part of the decision tree that guides investment behavior. Investors want to know not only what a product invests in, but what the after-tax experience will likely look like and how different structures may affect their personal outcomes. This mindset shift is driving the broader proliferation of tax-aware and tax-efficient products, giving investors a wider menu of options. For managers, the competition for tax-sensitive capital is growing, and clarity around tax positioning is essential to product design and distribution.
A key part of this evolution is the industry’s growing use of “tax alpha,” a term now frequently used in product offering documents and investor education. Tax alpha refers to the additional after-tax return that can be generated through thoughtful structuring, timing, and portfolio management versus an index or other standard measures of return. Different clients interpret tax alpha in different ways, with some focusing on reducing annual tax drag, some focusing on long-term compounding efficiency, and others looking at the predictability of tax reporting.
Just as important are the strategies behind tax alpha. In credit markets, investors are increasingly attentive to how credit products are taxed and what tools exist to mitigate things such as ordinary-income exposure, smooth income inclusion, and reduce items such as ECI, UBTI, and state-sourced income that can add to taxes and filing costs. In the equity space, fund structures, holding periods, and gain-recognition patterns all shape the after-tax result. Investors now weigh these factors when selecting among vehicles.
For LPs navigating an expanding product set, the considerations extend beyond return modeling. Investors should assess how a fund’s tax design fits with their personal or organizational tax profile, liquidity needs, reporting expectations, and cross-jurisdictional exposure. A strategy that is highly tax-efficient for one type of investor may introduce complexity for another. With tax-aware strategies becoming a more prominent part of the market narrative, LPs are developing sharper perspectives on what truly drives after-tax value.
Charting the path forward
As 2026 unfolds, managers that succeed will be those that:
- anticipate the expanding role of strategic and GP-stake investors
- design retail-accessible products that balance simplicity with tax integrity
- embrace flexible, multi-path liquidity strategies
- embed tax considerations from product design through ongoing operations
Taken together, these four dynamics signal a market entering a new phase, one where growth ambitions, liquidity engineering, and tax strategy are no longer parallel considerations but integrated components of the same decision-making framework.
Webcast — 2026 Private Capital Outlook
Join our Feb. 23 Tax Readiness webcast and register today.
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Follow us
