Composition of the Capital Efficient Universe as of June 30, 2024

Eryn Bacewich Head of US Insurance Solutions eryn.bacewich@mercer.com Gary Sems US Insurance Investment Director gary.sems@mercer.com Insurance companies continue to allocate to the private markets through various forms of vehicles with favorable cost-adjusted yields known as capital efficient vehicles. Key findings of the universe are summarized below: Over the past 18 months, the number of strategies within our capital efficient universe increased across private credit, real estate debt, and infrastructure debt from 89 to 119 strategies. Although the number of strategies within the universe increased, the percentage of US and non-US strategies remained relatively unchanged at 72% and 28% respectively. The overall credit quality of the Class A tranche improved and became a more significant portion of capital structures on average (see change from December 2022 in the right). Several managers have expanded the capital structure to include an additional tranche, Class C, to enable a stronger credit rating for the Class A tranche. Rated notes continue to be the most common form of capital efficient vehicle, representing 71% of Mercer’s capital efficient universe. Evergreen capital efficient vehicles are on the rise, representing 28 strategies compared to 16 as of 12/31/2022, signaling a potential shift in investor preference to open-ended evergreen structures vs. closed-end structures. Downgrades have been limited, but one Class B note was downgraded from BB to BB-, primarily driven by the fund’s increased exposure to equity relative to the initial asset-allocation expectations.