Entering 2026, market conditions reflect a period of adjustment that has reshaped expectations for alternative investment fund managers around growth, risk, and execution. Growth has proven more durable than many expected, yet the forces shaping performance are evolving quickly: Productivity gains, shifting capital formation patterns, heightened expectations around operations and governance.  

These dynamics were a central focus of discussions among economists, investors, and operators at CohnReznick’s 2026 Alternative Investment Fund Summit, where experienced industry participants examined how these forces are intersecting and what they mean for decision-making heading into the next cycle. 

For managers across private equity, private credit, hedge funds, and related strategies, the takeaway was clear: Market signals matter, but execution is the focus. The ability to translate macro signals into disciplined investment decisions, scalable operations, and sustainable business models is what separates firms positioned to grow through the next cycle from those that struggle to adapt. 

Read on for top insights, and contact our team to continue the conversation. 

Macro conditions, productivity, and the pace of change 

Our Summit opened with a conversation with Anna Wong, Chief U.S. Economist at Bloomberg Economics, sharing her perspectives on the macroeconomic conditions shaping 2026’s market. 

In summary: Conditions entering 2026 reflect early-cycle momentum supported by productivity gains, alongside structural pressures emerging across labor markets and consumer credit. Growth has remained more resilient than many expected through 2025, aided by private-sector activity and technology-enabled efficiency. While policy risk remains, inflation has moderated, and output has remained strong, reinforcing the role productivity is playing in sustaining expansion. 

Wong emphasized that productivity is the variable “squaring the circle” of strong growth alongside easing inflation. In her view, productivity gains, particularly those driven by AI adoption, have enabled economic expansion that would otherwise be difficult to reconcile with current policy and geopolitical pressures. Without those gains, today’s environment would more closely resemble prior inflationary cycles where growth durability was far more fragile.  

AI-driven productivity is not only influencing output, but also accelerating economic adjustment. Wong noted that adoption is occurring faster than in prior technology cycles, compressing the available time to adapt for labor markets, pricing dynamics, and business models. That speed matters: Rapid efficiency gains can amplify second-order effects, especially in roles and sectors with higher exposure to automation, even when headline employment data remains relatively stable. 

Consumer credit dynamics add another layer of complexity. Household leverage remains elevated across credit cards, auto loans, and student debt, and the resumption of student loan repayment enforcement is expected to concentrate pressure among borrowers with limited capacity to absorb higher costs. For fund managers, these dynamics influence portfolio performance not only through consumer demand, but also through lender behavior, credit availability, and valuation assumptions. 

Looking ahead, Wong characterized the current environment as more consistent with early-cycle dynamics than a late-cycle slowdown. Indicators such as new business formation, stabilization of small-business hiring, and slowing bankruptcy activity suggest the economy is adjusting rather than contracting. Expectations for 2026 are therefore measured but constructive, with growth likely to continue while dispersion across sectors and strategies increases as adjustment periods shorten. 

Capital raising: Selectivity, structure, and durability 

Capital raising remains competitive, with allocator selectivity elevated across strategies. Capital is available but increasingly concentrated among managers who demonstrate performance, readiness, and differentiation.

Separately managed accounts (SMAs) continue to play a prominent role, particularly for larger allocators seeking control and customization. Our panelists noted, however, that SMAs can introduce volatility into a firm’s capital base. Several managers experienced large allocations being reduced or withdrawn following short-term performance dips, underscoring that early scale does not always translate into durable capital. While SMAs can accelerate growth, they may also heighten liquidity and concentration risk, particularly when a small number of investors represent a meaningful share of assets.

Beyond liquidity, early SMA terms can also create longer-term constraints. Side letters, rights of first refusal, and capacity provisions negotiated to secure initial capital may later limit flexibility as firms scale. Concessions that appear manageable at launch can be difficult to unwind, affecting future fundraising and strategic optionality. 

Seeding activity remains active but narrow. While seed capital is available, only a small fraction of managers reviewed ultimately receive backing, often driven by existing relationships rather than open processes. Managers were also cautioned that like early SMA conditions, seed economics, while attractive early, can become restrictive years later as firms mature and outgrow initial arrangements. The trade-off between speed to market and long-term flexibility remains central, particularly for first-time managers. 

Across these dynamics, a consistent theme emerged: Capital durability matters as much as capital access. Panelists cautioned against over-reliance on a narrow set of large allocations, noting that capital structures built too narrowly can unravel quickly when a single investor exits. Investors are increasingly focused on whether a firm’s capital base can support growth through market cycles, not simply enable a successful launch. 

One panelist phrased this idea as “building your business like a pyramid, not a Jenga tower” – so that if one solid piece of funding is removed, your business still stands. 

Building the business investors want to back 

For all managers, but particularly emerging managers, differentiation is increasingly tied to how the business is built, not just how capital is raised or returns are generated.  

Investors are looking for evidence that a firm is designed to operate beyond its initial fundraising phase. Clear approaches to compliance coverage, financial oversight, and operating infrastructure demonstrate whether a firm is being built as a durable business rather than a short-term capital-raising vehicle. Managers are expected to articulate considerations such as: 

• How compliance responsibilities are handled 
• Whether CFO functions are internal or outsourced 
• How financial planning is structured across the first several years 
• How technology decisions support scale 

Again, this scrutiny extends beyond first-time managers: Established firms expanding into new strategies, structures, or investor channels face similar expectations around operational readiness and long-term sustainability. 

Operating discipline and regulatory readiness 

Operating discipline continues to shape how fund managers are evaluated by both investors and regulators. What became clear is that changes in regulatory leadership or rhetoric have not materially altered examination priorities. Scrutiny remains firmly focused on conflicts, fees and expenses, allocations, and marketing practices. While examination timelines may lengthen in some cases, firms should not mistake slower pacing for reduced oversight; initial request lists remain extensive, and expectations around preparedness remain high. 

A notable shift is the timing of regulatory engagement. Newer managers are increasingly subject to examinations earlier in their lifecycle, leaving little margin for informal or “catch-up” compliance once registration is complete. This has elevated coordination across legal, compliance, finance, and operations from a best practice to a baseline requirement. 

As firms expand into more complex structures, governance expectations rise accordingly. Co-investments spanning private and retail vehicles, GP-led secondary transactions, and evergreen or hybrid structures introduce heightened scrutiny around valuation support, conflict management, and documentation. These elements must evolve in tandem with structural complexity to withstand regulatory review and protect both managers and investors. 

Technology adds another layer to this operating challenge. Even where formal rules are still evolving – particularly around the use of AI – regulators are increasingly focused on whether firms have assessed relevant risks and documented their approach. Demonstrating awareness, internal controls, and cross-functional oversight has emerged as an expectation in its own right. 

Tax considerations 

• Self-employment tax: While partners typically must report their net earnings from self-employment income for purposes of the self-employment tax, IRC Section 1402(a)(13) provides an exception for the distributive share of income from a limited partner. But the term “limited partner” is not defined in the code, and recent tax court cases have been examining how to determine who qualifies. Fund managers still relying on the 1402(a)(13) exception will continue to face tax risk and uncertainty as these cases work their way through the courts. In the meantime, managers should work with their tax advisors to see if any changes to structure or filing positions should be considered. 

• One Big Beautiful Bill (OBBB) Act: Amid July 2025’s sweeping tax changes, key provisions for fund managers to note included: 
  • 199A: The deduction of qualified business income becomes permanent at 20%. 
  • 163(j): Adjustments have been made to the calculation of adjusted taxable income (ATI); most notably an add-back for depreciation and amortization deductions. 
  • 461(l): The excess business loss limitation becomes permanent. 
  • 1202: The qualified small business stock (QSBS) gain exclusion has been expanded with a tiered gain exclusion, depending upon the hold period, for QSBS acquired after the date of enactment, and the per-issuer dollar cap has been increased. 
  • Carried interest remains unchanged. 
• Sourcing rules: California recently finalized a rule calling for payment of income tax on management fees from investors in the state. Managers will need to evaluate their exposure – and watch for similar requirements from other states. 

Positioning for 2026 

Heading into 2026, the environment is testing how quickly firms can translate signals into action. Productivity gains are shortening adjustment periods, capital is more selective, and operating complexity continues to rise. Still, our panelists felt there was reason to be hopeful in 2026, after a rough 2025. The firms best positioned to perform will be those that can make decisions early, support them operationally, and adapt without disruption as conditions evolve.