The evolution of capital efficient structures 

While the events of the most recent year have introduced significant uncertainty in capital markets, we expect insurance companies to continue increasing their allocations to private markets. For certain insurers, these investments are executed through various forms of vehicles with favorable cost-adjusted yields (capital efficient vehicles).

At Mercer, we have monitored the development of these structures over many years and seek to provide more clarity to clients on the various implications of these vehicles. With increased scrutiny and expected regulatory changes on the horizon, it is important to better understand this topic and the various tradeoffs. This paper is intended to cover several key considerations including:

• Background: How we got here
• The history and evolution of capital efficient vehicles
• The composition of today’s capital efficient vehicle universe
• Relevant regulatory work streams and potential outcomes
• Mercer’s framework for considering capital efficient vehicles