2026 Investment Management Outlook: AI, ETFs, and the New Growth Playbook

Investment Management Industry at a Critical Inflection Point

The investment management industry enters 2026 confronting a striking paradox: profit growth remains elusive, yet the opportunities for differentiation have rarely been greater. According to Deloitte’s 2026 Investment Management Outlook, investors continue migrating to low-cost vehicles, alternatives are capturing the next wave of growth, and industry leaders are scaling artificial intelligence from isolated experiments to enterprise-wide platforms.

At the same time, rising technology spend, expanding compliance obligations, and increasing distribution complexity are pushing firms to fundamentally rethink their operating models, talent strategies, and product architectures. The report identifies several converging forces—active ETF growth, private market democratization, regulatory reform, and AI maturation—that are collectively reshaping the industry’s competitive landscape in ways not seen in over a decade.

What makes 2026 distinctive is the simultaneous acceleration across multiple dimensions. Unlike previous years where one trend dominated the conversation, investment management firms must now navigate the intersection of product innovation, technological transformation, and regulatory change all at once. The firms that can synthesize these forces into a coherent strategy will likely emerge as the decade’s winners, while those that treat each trend in isolation risk falling behind. For a deeper analysis of how AI is reshaping financial services, explore our interactive library of industry analyses.

Active ETFs Surge to Reshape Investment Management Products

The growth trajectory of active exchange-traded funds has been nothing short of remarkable. Active ETF assets under management grew by 68% in 2024, climbing from $502 billion to $843 billion. Their share of total US ETF net inflows has risen dramatically—from just 1% in 2014 to 26% in 2024—highlighting a fundamental shift in how investors access professional portfolio management.

The numbers tell a compelling story of structural change. Over the past year, the US market saw the launch of 468 new active ETFs, bringing the total to 1,600 funds. In stark contrast, passive ETFs increased by only 52, while active mutual funds declined by 171. This divergence reflects an industry-wide recognition that the ETF wrapper—with its tax efficiency, transparency, and lower costs—has become the preferred vehicle for delivering active strategies.

Europe mirrors this trend. Net flows into active UCITS ETFs rose from 2.1% of total UCITS ETF flows in 2020 to 6.1% in 2024, while active UCITS ETF AUM surged 80% from €27.2 billion in 2023 to €49 billion in 2024. Deloitte suggests this growth signals more than passing interest—it reflects a structural realignment as asset managers and investors adapt to a new era of investment preferences. The introduction of ETF share classes for existing mutual funds represents one innovation that could slow the outflow from active mutual funds, though the distinct back-office requirements mean fund managers would need to invest in operational upgrades.

Private Markets Open New Doors for Retail Investors

While private capital fundraising experienced a steady decline following its 2021 peak—with total capital raised by 2024 decreasing by approximately one-third—the outlook for 2026 is notably more optimistic. Several converging factors are set to transform private market access, particularly for retail investors who have historically been excluded from these higher-return investment opportunities.

The SEC’s decision to no longer limit closed-end funds holding more than 15% of assets in private funds has opened a significant new channel. This regulatory shift, combined with the Department of Labor’s rescission of its 2021 guidance that had discouraged alternative investments in 401(k) plans, creates a fundamentally more permissive environment for retail exposure to private markets. Collective investment trusts and registered interval funds are emerging as the preferred vehicles for offering alternatives within defined contribution plans.

The Deloitte Center for Financial Services projects that alternative funds, including those targeted to retail investors, could grow by more than 50% compound annual growth rate to reach $4.1 trillion by the end of the decade. This projection rests on several catalysts: potential tariff stability enhancing valuation confidence, broader DC plan access to alternatives, and deeper retail participation enabled by new product structures. The convergence of these trends represents perhaps the most significant democratization of investment access since the mutual fund revolution of the 1980s.

Regulatory Reforms Accelerate Product Innovation

The regulatory landscape in 2026 is characterized by a decisive shift toward enabling innovation while maintaining investor protection. In the United States, the regulatory environment has become notably more conducive to capital flows and product experimentation. Beyond the SEC’s guidance on closed-end fund structures, the passage of the GENIUS Act established clear regulatory guidelines for stablecoins, explicitly stating that payment stablecoins are neither securities nor commodities.

In Europe, the Savings and Investment Union initiative aims to increase investment returns for EU citizens while growing capital available to businesses. Notably, EU citizens currently allocate more than 31% of their financial portfolios—approximately €11.6 trillion in aggregate—to assets such as bank deposits that offer little to no return. The European Long-Term Investment Fund framework (ELTIF 2.0) has already eased the marketability of alternative investments to retail clients, with 40 of 51 ELTIF launches registered for retail marketing as of July 2025, compared to just 18 of 32 during the prior period.

Ireland is emerging as a competitive alternative to Luxembourg for fund domiciliation, with its Central Bank offering fast-track fund approval in 24 hours compared to Luxembourg’s potential six-month review time. Throughout 2026, the choice of fund structure will be more consequential than ever, as product wrappers increasingly determine distribution reach, investor access, and long-term growth potential. Even one of the world’s largest ETFs by AUM is asking shareholders to convert from a unit investment trust structure to an open-end ETF to gain greater operational flexibility.

Investment Management M&A Consolidation Reaches a Decade High

The investment management industry’s consolidation wave accelerated dramatically in 2025. M&A deal volume in the first half of 2025 jumped 46% over the same period in 2024, marking the most active first half in more than a decade. This surge reflects multiple pressures: ongoing cost compression, the need for new capabilities, and the strategic imperative to compete across increasingly blurred product boundaries.

A significant portion of these transactions targeted wealth management and investment advisory firms, continuing a pattern established in 2023. Approximately 25% of M&A deals in the first half of 2025 involved targets with estate, retirement, or financial planning capabilities—up from 20% in 2024 and 18% in 2023. This trend signals the industry’s preparation for what Cerulli Associates estimates will be a $124 trillion intergenerational wealth transfer through 2048.

Strategic partnerships are also reshaping the competitive landscape. The Legal & General Group and Blackstone partnership exemplifies the trend, allowing Legal & General’s clients to access Blackstone’s credit origination platform while committing up to 10% of new annuities flows to Blackstone funds. Similar partnerships between KKR and Global Atlantic, and Blue Owl Capital and Kuvare, illustrate how the traditional distinctions among investment firms, hedge funds, and private capital are fading as product innovation fuels overlap across segments.

AI in Investment Management Scales From Sandbox to Enterprise

The artificial intelligence narrative in investment management has shifted decisively from experimentation to execution. Firms have moved beyond asking “Can AI add efficiencies?” to confronting more strategic questions: What are the priority projects? What are the deployment risks? Which tasks should remain internal versus being outsourced? And critically, what governance model should oversee AI-enhanced processes?

The data points are striking. Morgan Stanley’s financial advisers have achieved 98% AI adoption, using AI-powered tools to bring in new customers and assets at an accelerated rate. In private equity, 64% of firms now report using AI to streamline due diligence processes, helping reduce costs and enhance market outcomes. AI is being leveraged not just for efficiency but for identifying prospective portfolio companies and supporting early relationship initiation through sophisticated pattern recognition.

Schroders’ virtual investment committee agent—designed to analyze sector dynamics, evaluate business model implications, and assess potential risk factors—represents an even more ambitious deployment that strikes at the heart of active investment management. AI funding is becoming a growing priority for financial services firms, with budgets shifting from discrete, task-based solutions toward enterprise infrastructure and unified AI principles. Explore how leading firms are leveraging AI for competitive advantage in our curated analysis collection.

Agentic AI Emerges as the Next Competitive Frontier

Beyond traditional AI deployments, agentic AI has emerged as the next frontier for investment management innovation. A recent Deloitte survey indicates that 26% of respondents reported their organizations were already exploring autonomous agent development to a large or very large extent. These AI agents are software systems that can complete complex tasks and meet objectives with little or no human intervention.

Deloitte outlines a compelling use case: imagine a retail firm with advanced agentic AI capability accessing both operational and client interaction data. Such a system could screen interactions for common questions, create behavior-driven segmentation, analyze portfolios for improvement opportunities—from raising dividend yield to improving diversification and risk-adjusted returns—and then alert representatives with compliant investment recommendations tailored to each investor segment.

As Dimitri Tsopanakos, partner at Deloitte MCS Limited, noted: “The utilization of AI, especially agentic AI, isn’t just another digital transformation; it’s a whole new playbook where people aren’t simply updating their skills, they’re learning how to collaborate with AI agents as co-workers.” This paradigm shift requires investment firms to develop entirely new competencies around AI collaboration, oversight, and governance—capabilities that will increasingly separate industry leaders from laggards.

Investment Management Talent Transformation and AI Translators

The talent landscape in investment management is undergoing a fundamental transformation driven by the convergence of product innovation and AI adoption. While demand for traditional industry expertise has remained relatively flat, skills such as digital fluency, cross-disciplinary thinking, and product innovation are gaining significant momentum. In the first half of 2025, skills related to fundraising or process optimization were cited in roughly one out of every four US investment management job postings.

AI-specific hiring tells an even more dramatic story. Job postings referencing artificial intelligence rose by almost 25% from 2022 to the first half of 2025. AI is now featured in 2.4% of all US job postings by industry firms, up from 0.7% in 2022. The growth extends to specific technologies: mentions of generative AI grew from a single posting in 2022 to 288 by mid-2025, alongside similar growth in references to large language models and prompt engineering.

A critical insight from Deloitte’s research is that organizations with broader AI adoption achieve greater success. A survey found that 43% of financial services firms with high generative AI expertise gave access to over 40% of their workforce, compared to just 19% of firms with lower expertise. The integration of liberal arts graduates into investment teams reflects recognition that critical thinking and creativity are powerful complements to technical expertise. The emerging role of “AI translator”—professionals who can convert AI outputs into actionable insights—may prove to be the most valuable new position in the industry. For insights on how organizations are transforming their workforce strategies, visit our interactive library.

Digital Assets and Tokenization Gain Regulatory Clarity

The passage of the GENIUS Act in the United States has provided significant regulatory clarity for digital assets, particularly stablecoins. By establishing that payment stablecoins are neither securities nor commodities, the legislation removes a major barrier for investment managers considering tokenized fund offerings. Since the Act became law, several US investment managers have created tokenized money market funds, signaling the beginning of a broader tokenization wave.

Tokenization promises to enhance liquidity through fractionalization of shares and enable round-the-clock trading—benefits that are particularly compelling for private market investments where liquidity has traditionally been a constraint. Australia’s central bank has selected 24 use cases—19 utilizing real money—for tokenized settlements involving diverse asset classes including private equity and carbon credits, with results expected in early 2026.

According to the CFA Institute’s research on tokenization, the technology represents a promising frontier for new product development. Deloitte expects to see tokenization expand to additional fund types over the next year, with particularly healthy growth in tokenized funds investing in private assets, where investors stand to benefit most from the additional liquidity afforded by tokenization. This convergence of regulatory clarity and technological maturity positions 2026 as a potential inflection point for digital asset adoption in mainstream investment management.

Investment Management AI Governance Framework for 2026

As AI deployments scale across investment management firms, the governance gap is becoming increasingly apparent—and dangerous. Despite increases in AI-related job postings, Deloitte’s analysis shows that current governance mentions in investment management job descriptions remain generic and not AI-specific. While the SEC recently withdrew an AI rule proposed in 2023, the regulator continues to prioritize enforcement against AI-related misconduct.

The challenge is vivid: imagine being a chief compliance officer asked about the firm’s AI data privacy and IP protection policy. The answer likely depends on when and where each AI use case was introduced, with departments having implemented their own ad hoc solutions. Without strategic frameworks, AI projects can multiply into an unwieldy collection of mismatched policies, undocumented assumptions, and inconsistent data management choices.

Deloitte’s recommendation is clear: leading organizations should establish AI governance managed by a central team with enterprise-wide authority, prioritizing model inventories, model risk assessments, clear data lineage, rigorous vendor vetting, defined human-in-the-loop thresholds, comprehensive audit trails, and incident response protocols. The firms that build these governance foundations now will be positioned to scale AI safely and confidently, while those that delay risk both regulatory exposure and operational fragility as their AI footprint grows.

Looking ahead through 2026, Deloitte advises investment management leaders to take three critical action steps: choose product wrappers deliberately by refreshing ETF roadmaps and evaluating tokenization; transform the workforce with translators, educators, and platform specialists—not just data scientists; and cement an AI operating model that scales safely through centralized governance with federated execution.