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We believe a glossary is key for any client trying to navigate through the range of complex terms and jargon in our industry.

Our most frequently defined terms are defined below but if there's something you think we should add, please contact us.



In terms of a portfolio of assets, using leverage means borrowing cash to purchase more assets so that exposure to those assets is greater than the value of the original portfolio. In investment analysis, a highly-leveraged company is one where small changes in underlying conditions produce big swings in profits. Leverage can be financial, or operational if, for example, a company has large fixed overheads. The amount of a company’s total borrowings divided by its share capital. High leverage means a proportionately large amount of debt compared to assets.

Leveraged loans

Loans extended to companies or individuals that already have considerable amounts of debt. Leveraged loans for companies or individuals with debt tend to offer higher interest rates than typical loans. These rates reflect the higher level of risk involved in issuing the loan. Leveraged loans are also used in the leveraged buy-outs of other companies.


The projected cash flows that a pension scheme, or insurance company, is committed to pay out to its members.

Liability benchmark

Typically a portion of the scheme's liability cash flows, converted to investible instruments, to which a present value can be assigned and scaled to reflect the trustee's target hedge ratio.

Liability cash flows

Projections of the future benefit payments of the scheme, usually calculated by the scheme actuary.

Liability Driven Investment (LDI)

Managing assets directly against projected liabilities in order to ensure that they can be met. Often used by defined-benefit schemes.

Liability matching

Investing in assets which are sensitive to interest rates and inflation in order to reduce the mismatch between a scheme’s assets and its liabilities. The purpose is to reduce the expected volatility of the funding position.


The London Interbank Offered Rate is the quoted average index rate at which banks are willing to lend to one another. Libor is commonly used as the rate reference for the floating payments under an interest rate swap and many other derivatives.

Limited Price Indexation (LPI)

A measure of price inflation used to index the value of pension payments to annual increases in the cost of living. The annual LPI increase is the lower of the increase in the RPI and 5%, with a floor of 0%.

Liquid asset

An asset that can be readily and inexpensively turned into cash.


The ease with which buying and selling takes place in the market. Liquidity can be measured by the daily trading volume in a security.

Liquidity fund

A fund which aims to provide competitive money market rates whilst offering same-day access to cash tied up in the fund.

Liquidity risk premium (LRP)

In order to overcome investors’ desire for liquidity, less liquid assets must offer a higher return to compensate for reduced flexibility.

London Inter-Bank Bid Rate (LIBID)

The interest rate paid by a bank on Euro currency deposits. It is the rate at which a bank can borrow from other banks.

Long trades/positions

The buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value. In the context of options, the buying of an options contract.