Change 2026 – Risk in focus: Governance is becoming the defining investment filter

Des Fullam, Chief Regulatory and Solutions Officer

Download the Change 2026 report

The balance between growth ambitions and risk discipline is shifting. Our latest Change research shows that risk considerations are now exerting greater influence over investment decision-making than at any point in the past decade, reshaping how institutional investors assess managers and allocate capital. 

That shift is being driven by rising systemic concerns across private markets. Nearly three-quarters of institutional investors say they are ‘very concerned’ about systemic risk in 2026, with leverage and liquidity mismatches cited as the most material vulnerabilities. As private markets investment continues to expand in scale and accessibility, both managers and investors expect the risk curve to rise further. Valuation practices are also coming under sharper scrutiny, with conflicts of interest emerging as a growing pressure point for investors. 

Regulation exerts growing pressure 

Alongside these systemic dynamics, regulatory requirements continue to evolve and expand. Rising regulation has been a consistent feature of every Change report to date, reflecting its central role in safeguarding markets and investors alike. Almost nine in ten managers and virtually all investors expect regulatory complexity to increase over the next two years, underscoring the need for firms to continually adapt their operating models, controls and resourcing. 

For many managers, this translates into additional operational demands, particularly where compliance processes remain manual. Meeting regulatory expectations efficiently increasingly depends on robust systems, clear accountability and scalable frameworks that can support growth while maintaining high standards of oversight. 

Governance now determines capital allocation 

In this environment, corporate governance has become a decisive investment filter. Nearly all (96%) institutional investors report having rejected a fund due to governance concerns, and scrutiny is only set to intensify. Investors are placing greater emphasis on independence, conflict management and fiduciary oversight, with many expecting material increases in oversight requirements over the next three years. 

What emerges from the research is a clear alignment between investors and managers on the importance of governance as a foundation for sustainable growth. Strong governance is no longer viewed as a differentiator, but as a prerequisite for access to capital in an increasingly competitive and closely scrutinised market. 

Growth expectations, rewritten through a risk lens 

Against an uncertain backdrop and continued volatility, our Change 2026 findings show that growth expectations and risk considerations are now deeply intertwined. Institutional investors are setting higher standards around transparency, independence and accountability at the same time as regulatory frameworks continue to evolve. For fund managers, ambition must be supported by operating models that can withstand closer scrutiny and adapt to rising complexity. 

As a result, governance, risk management and operational resilience are becoming central to long-term success. Firms that invest in these areas are better positioned to meet investor expectations, navigate regulatory change and build durable growth in a market where confidence is increasingly earned through discipline. 

As systemic risks continue to rise and regulatory demands evolve, the managers best placed to succeed will be those who view governance not as an obligation, but as a core enabler of trust, resilience and sustainable performance. 

See the strategies managers and investors are leaning on to overcome the pressures of risk and regulation. Download Change 2026 now.