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Investment glossary

Cut through the investment jargon with our handy glossary

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We want to make our investments easy to understand. Take a look through the explanations below to help you get to grips with the terms that come with it.



Absolute emissions

This is our total portfolio emissions, shown as tonnes of carbon dioxide and equivalents (tCO2e).

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Absolute return

This is the amount an investment has earned or lost over a period of time.

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Annualised return

This is the amount an investment has earned or lost on average each year, over a period of time.

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Purchasing an annuity with your defined contribution (DC) savings (like the Investment Builder) means you’ll buy a regular income for life when you retire. The rate received will depend on a number of things, like the amount of money in your DC pot, market conditions, your age and health, whether or not the income will increase once in payment, and whether a pension will be provided to your dependants when you die.

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These are the different types of investments held within USS. Our assets may include company shares, UK government bonds, property, infrastructure and cash. Our assets, and earnings on those assets, are used to pay the benefits due to members.

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Asset classes

An asset class is a grouping of investments that have similar characteristics and are subject to the same laws and regulations. Equities (stocks), fixed income (bonds), cash and cash equivalents, real estate, commodities are examples of asset classes.

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Active management

Active management is the buying and selling of investments with the intention of outperforming a specific investment market or benchmark.

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Our investment benchmark is the hypothetical amount of returns our market assets (such as equities, credit and property) should achieve for us to meet the benefits members have earned – and still be within risk levels agreed to by the employers. The benchmark acts as a guideline for the level of risk our in-house investment team will target in its portfolio. It also shows how well an investment has performed. By investing in more diverse assets, our in-house investment team aim to deliver returns over the benchmark and still target the same (or a lower) level of risk.

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Bonds come in two types: corporate bonds (loans to companies) and government bonds (loans to a government). Investors typically receive a fixed return on their investment or ‘interest’ on their loan, except for index-linked bonds, which is linked to inflation.

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Carbon dioxide equivalent (CO2e)

CO2e is a common measurement of all greenhouse gases. In other words, the impact of all greenhouse gases is expressed in terms of the equivalent amount of carbon dioxide that would result in the same amount of global-warming. Put simply, CO2e gathers all greenhouse gases into one place. On the other hand, CO2 only measures carbon emissions and doesn’t account for any other greenhouse gases. For example, methane has more of a greenhouse gas effect than carbon dioxide. On a like for like basis, methane has 28 times the impact of an equivalent volume of carbon dioxide over a one hundred year period.

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Carbon footprint

A carbon footprint refers to greenhouse gases (GHG) associated with some particular activity, investment or portfolio, measured in terms of the amount of GHGs emitted per £m invested.

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Climate Action 100+

We have joined more than 700 global investors with over US$68 trillion in assets under management as part of the Climate Action (CA) 100+. This project sees investors engage with the world’s largest emitting companies to encourage them to act on climate change by, for example, reducing emissions, strengthening climate-related financial disclosures, and improving their governance of climate change issues as they affect their business. We will continue to engage with companies in collaboration with other investors to ensure that they do more to address climate change. The outcome will be better communication with investors on how companies are managing the transition risk.

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Climate change

Climate change is an urgent issue of global significance. The scientific consensus is that carbon dioxide and other greenhouse gas emissions, caused by human activity, are contributing to changes in the atmosphere that will cause significant changes in global temperatures.

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Climate change risk

This is the risk of material financial impact from climate change, where asset values are impacted by economic transition in response to climate change, and by physical risk of damage to assets from extreme climate and weather events. This could lead to loss of value of assets from transition to a low-carbon economy or physical damage, especially where we are long-term holders of those assets.

We believe climate change presents a significant financial risk and that a low carbon world will likely be a more financially stable world. That’s why we have set an ambition for our investments to be net zero by 2050, if not before.

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Climate tilt

USS Investment Management has introduced a climate tilt to the portfolio of companies it invests in. The tilt covers over £5bn of these investments. It means we will invest in more climate-friendly assets while having a lower exposure to companies poorly positioned to adapt. This will first reduce emissions by 30% compared to the market, and is then designed to decrease them by 7% each year after.

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Climate tipping point

A climate tipping point is where a seemingly small change in the climate triggers a larger and often unstoppable change in part of the climate system. For example, melting polar ice causes a change in the Gulf Stream, which impacts the climate of Western Europe.

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Collateral is an asset that is transferred or pledged as security against outstanding financial obligations that the non-defaulting party has the right to seize if the other party defaults on the obligation.

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Composite benchmark

This is a group of benchmarks put together to provide the overall benchmark of the fund. We use this approach as no standard market benchmark is a fair representation of the fund.

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Corporate bonds

Corporate bonds, otherwise known as credit, are an important part of our assets. Corporate bonds invest in the debt of companies and provide a regular income stream.

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Cumulative return

This is the total change in the price of an investment over a set period of time. It’s the total figure, not a yearly rate where the set period is longer than 12 months.

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Defined contribution (DC)

A DC pension arrangement is a savings pot based on how much you (and sometimes your employer) put into it. The money in your pot is invested and the value of your pot can go up or down – it all depends on how your investments perform. Your savings can then be used in a variety of ways when you come to take them. The Investment Builder is a DC arrangement.

Watch our short video for some pensions basics, how they work and the benefits of saving for your future.

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Direct private equity

These are investments in companies or assets with leading market positions, high-quality management teams and with stable cash flows. This includes core infrastructure, renewables and lower-risk private equity. For example, Heathrow Airport and MOTO service stations.

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Do It For Me Option

An investment option for members with Investment Builder savings. If you choose this option (or don’t make a choice), we’ll manage your investments for you.

We invest your savings into a mix of funds. As you get closer to your Target Retirement Age, we gradually move your investments from funds with higher potential for growth but higher risk into funds that have less risk but less potential for growth. This aims to protect the value of your savings as you get close to taking them.

Watch our short video on investment choices and any decisions you need to make – such as whether you’d prefer us to manage your investments, or whether you want to make investment choices for yourself.

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Emissions intensity

This is our carbon footprint, shown as tonnes of carbon dioxide and equivalents (tCO2e) per million pounds invested.

Our interim targets are based on emissions intensity as we’re still an open scheme and our investments will change over time. As the scheme grows or shrinks, the absolute emissions of our investments will grow or shrink alongside it. But this wouldn’t be because of an increase or decrease in the emissions produced by our investments.

Reporting on emissions intensity provides a more reliable indicator of how we’re engaging with our investments and pushing for change. Our end net zero ambition is however based on absolute emissions.

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Environmental, social and governance (ESG)

We have a legal duty to invest in the best financial interests of our members and beneficiaries. To do this, we consider financially material environmental, social and governance (ESG) factors when we invest. We integrate these ESG factors into our investment decision making and stewardship processes, where relevant. This means we work hard to assess how companies manage these factors and, once we have invested, we engage with companies as a steward to encourage improved management of ESG issues.

Environmental factors relate to how our investments are impacted by, and have an impact on, our natural environment. This includes things like climate change and the transition to net zero. Social factors look at how relationships are managed with employees, suppliers, customers, and the wider community. This includes things like health and safety or human rights. Governance looks at how a company is run, including issues like a company’s leadership, board composition, and executive pay.

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Equities are shares in UK and overseas (Global) companies. Equities expect to generate higher rates of return in the longer term than bonds or cash but carry a higher investment risk because the value may rise and fall rapidly. Equities may be more suitable for those members who aren’t planning to retire for several years as there’s time to ride out the rises and falls of the stock market.

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Equity fund

An equity fund is a fund that invests predominantly in shares and stocks of companies. The benefit of this is that you invest in numerous equities instead of just one.

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Financed emissions

An estimate of the emissions generated as a result of our investments.

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Flexi-access drawdown

This is one of the flexible ways you can take your defined contribution (DC) savings (like your Investment Builder pot) from age 55 (rising to age 57 in 2028). With flexi-access drawdown, you can take up to 25% of your pension savings tax-free upfront. The rest can remain invested and then be taken as income when it suits you. This income may vary depending on investment performance and it isn't guaranteed for life.

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Government bonds

This is debt issued by governments typically in developed markets and are nominal or inflation-linked, but can be debt issued by emerging economies too.

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Greenhouse gases (GHG)

The six gases listed in the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride. These contribute to the greenhouse effect and climate change.

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Illiquid refers to assets that cannot be easily sold, for example on the stock market. Land is an example of an illiquid asset.

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Investment Builder

The Investment Builder is the defined contribution (DC) part of USS. You save into it automatically if you earn above the salary threshold, or if you’ve made additional contributions or transferred other pension savings into USS since October 2016.

Your savings build up an Investment Builder pot, which works alongside your benefits in the Retirement Income Builder. We invest savings from you and your employer based on your investment choices. You then have some flexibility to choose when, and how, you want to use these savings.

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Let Me Do It Option

An investment option for members with Investment Builder savings. This option puts you in control of all your investment decisions, so you’re in charge of keeping track of how your funds are doing.

There are 10 funds for you to choose from and you can invest in one or more of them. They range from lower risk funds with possible lower returns, to higher risk funds, with potential higher returns.

Watch our short video on investment choices and any decisions you need to make – such as whether you’d prefer us to manage your investments, or whether you want to make investment choices for yourself.

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Leverage is a means of adding exposure to the investment portfolio in excess of its actual capital. Leverage is created using collateralised financial instruments which provide the economic equivalent to the investment portfolio of secured ‘borrowing’. Leverage is used for efficient portfolio management (i.e. to improve the portfolio’s risk/return profile).

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Liquidity refers to deposits and short-term loans and can be used to protect the value of your money when other assets, such as equities or bonds, are behaving in an unpredictable way. However, liquidity typically provides lower rates of return in the long term and there is still a risk that liquidity investments can go down in value from time to time, particularly after allowing for the effects of inflation.

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Market comparator

The defined contribution (DC) Growth and Ethical Growth funds aim to produce a positive return in the long-term and we vary the asset allocation accordingly to meet this long-term objective.

To help explain what these returns may look like in the long-term, the objectives for the return on investments have been translated into a simpler portfolio benchmark (using equities and bonds).

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Market volatility

Volatility is the frequency and size of movements in the investment price, up or down.

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Multi-asset funds

We offer diversified multi-asset funds that you can invest your Investment Builder savings in. These are the USS Cautious Growth Fund, the USS Moderate Growth Fund and the USS Growth Fund. The Ethical Growth funds are also multi-asset and available for the USS Ethical Lifestyle Option. They combine a number of different asset classes such as shares, bonds and cash together into a single fund.

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Net zero

Net zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by their removal out of the atmosphere.

In May 2021, we announced our ambition for our investments to be net zero by 2050, if not before.

To reach net zero we will:

  • Encourage the companies we invest in to transition towards a low-carbon world
  • Reduce the carbon footprint of our investment portfolio over time
  • Invest in assets that support the transition towards a low-carbon world, like renewables and clean technology

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Paris Agreement

A legally binding international treaty on climate change, signed in Paris in December 2015. Its overarching goal is to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.

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Paris aligned

Activities, for example financing or emissions targets, consistent with the objectives of the Paris Agreement.

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Passive management

Passive investment management (sometimes known as index-tracking) is the process of buying and selling investments with the intention of matching the returns of a benchmark or index.

A passive manager is attempting to match the index and so will hold almost all the different shares or bonds/gilts making up the index. This means passive investments should closely follow the market index returns whether the index goes up or down.

Passive funds usually have lower investment charges than active funds and can be less volatile relative to benchmarks or average return for the relevant market.

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Property investments

We make investments with long-term goals in mind and property is a perfect example of this, due to its stable returns.

We invest in supermarkets, nurseries, hotels, industrial estates, residential property, offices, petrol stations and more. It’s important that we add value to our properties where we can, by closely managing them – we do this by refurbishing, redeveloping or re-letting them.

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Private credit

Private credit specialises in providing finance across a variety of strategies including infrastructure and long-duration real estate lending, structured credit and private asset-backed securities. We work in partnership with counterparties to provide tailored and innovative financing solutions.

Our typical deal types include infrastructure lending, fund financing, structured credit, long lease and ground rents, specialist mortgage, and strategies where the investment outcome is typically uncorrelated to other asset classes and therefore a good source of diversification.

We look to invest globally, but with a particular focus on the UK, Europe, Australia and the US.

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Private markets

These are privately held assets that are bought and managed for a long period of time. They aren’t bought and sold on the public market or stock exchange, so the price is expected to remain more stable over time.

Examples of these investments include property, infrastructure, such as toll roads and airports or funding private companies.

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Public markets

These are investments which are traded publicly on exchanges or other recognised marketplaces. The types of investments this includes are bonds and equities.

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Quarterly Investment Report

To help you make investment decisions and understand your options, you can find a more in-depth look at each fund and their performance in the Quarterly Investment Report for the Investment Builder.

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Relative return

This is the amount an investment has earned or lost over a period of time, compared to its benchmark.

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The return is the amount of money earned or lost on an investment.

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Risk is the possibility that investment objectives won’t be achieved. For example, that expected investment returns do not materialise.

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Scope 1 emissions

Emissions from sources that an organisation owns or controls directly – for example, from burning fuel in a fleet of vehicles.

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Scope 2 emissions

Emissions that a company causes indirectly when the energy it purchases and uses is produced. The generation of electricity, for example, would fall into this category.

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Scope 3 emissions

Emissions that are not produced by a company itself but those that it is indirectly responsible for, up and down its value chain. An example would be the emissions associated with holiday flights: these emissions would be Scope 3 for the oil and gas company that provides the aircraft’s fuel.

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Sovereign debt/ non sovereign debt

Sovereign debt refers to the debt issued by governments (for example, UK gilts) to fund their activities. Non-sovereign assets are all other investments that are not guaranteed by governments and may include investments in a company, equity and debt, and property.

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We have a legal duty to invest in the best financial interests of our members and beneficiaries. To do this, we consider the financial impacts of environmental, social and governance (ESG) factors when we invest. We integrate these ESG factors into our investment decision making and stewardship processes. This means we work hard to assess how companies manage these factors and, once we have invested, we engage with companies as a steward to encourage improved management of ESG issues.

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Stewardship report

You can read our latest Stewardship Code report here. This report combines an update of our Principle-by-Principle approach along with details of new case studies and examples of other initiatives we’ve undertaken over the past year.

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This is the administrative and investment management costs that employers have made a commitment to cover for the foreseeable future.

Members who transfer other pension savings into USS don’t benefit from the subsidy on that transfer and will pay the full investment charge. The subsidy does apply to any additional contributions or contributions based on your salary above the salary threshold. View A guide to investing in the Investment Builder for more information on fees.

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Sustainable Growth mandate

Another initiative that will support our net zero ambition is a new £500m Sustainable Growth mandate. We will invest in high growth, privately-owned businesses that are developing the technologies and services that will help companies and the economy to decarbonise.

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Target Retirement Age (TRA)

This is the age you plan to start taking your Investment Builder savings. Your TRA only applies to any savings you have in the Investment Builder. It doesn’t have to be the same age that you start taking your Retirement Income Builder benefits and you can set or change it whenever you want to in My USS. Find out more in our pensions glossary.

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Task Force on Climate-related Financial Disclosures (TCFD) report

The report sets out how we're assessing climate risk and reducing emissions as we work towards achieving our net zero ambition. Alongside the full report, you’ll find a shorter summary document which summarises the report’s key messages and metrics.

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USS Default Lifestyle Option

This is one of the two lifestyle options available within the Do It For Me investment option. It’s designed to allow members to leave some or all of their Investment Builder savings invested to be taken at a later date, whilst also being appropriate for those who take it as tax-free cash (up to a HMRC limit). If you don’t make a choice, your savings will be automatically invested here.

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USS Ethical Lifestyle Option

This is the other lifestyle option available in the Do It For Me investment option. This option invests in funds that meet our ethical investment guidelines, there’s more information in the ethical guidelines we follow in My USS. You can choose for your savings to be invested in this option in My USS.

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Valuation Investment Strategy

The Valuation Investment Strategy or VIS is a theoretical, but investible, high level asset allocation that informs the Retirement Income Builder’s implemented investment portfolio. It is adjusted from time to time to remain consistent with the trustee’s risk appetite, and to balance the objectives for returns against risk tolerance.

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