Hurdle rate
InvestingDefinition
A minimum return that must be exceeded before a fund manager earns performance fees. Common in PE (often 8% IRR hurdle); rarer in hedge funds.
"Soft hurdle": once exceeded, manager gets carry on ALL gains. "Hard hurdle": manager only gets carry on gains ABOVE the hurdle. The structure dramatically affects realized fees.
"Soft hurdle": once exceeded, manager gets carry on ALL gains. "Hard hurdle": manager only gets carry on gains ABOVE the hurdle. The structure dramatically affects realized fees.