{"id":84,"date":"2008-04-17T09:13:53","date_gmt":"2008-04-17T17:13:53","guid":{"rendered":"http:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/what-is-a-hurdle-rate\/"},"modified":"2009-08-07T08:23:57","modified_gmt":"2009-08-07T16:23:57","slug":"what-is-a-hurdle-rate","status":"publish","type":"post","link":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/what-is-a-hurdle-rate\/","title":{"rendered":"What is a Hurdle Rate?"},"content":{"rendered":"<p align=\"left\">A hurdle rate is the minimum return necessary for a <a href=\"http:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/hedge-fund-manager\/\">fund manager<\/a> to start collecting incentive fees. The hurdle is usually tied to a benchmark rate such as Libor (London Interbank Offered Rate) or the one-year Treasury bill rate plus a spread.<\/p>\n<p><a href=\"http:\/\/www.hedgeco.net\/\">Hedge funds<\/a> which specify a soft hurdle rate charge a performance fee based on the entire annualized return. Funds which use a hard hurdle rate only charge a performance fee on returns above the hurdle rate.<\/p>\n<p>Let&#8217;s say,  for example, a <a href=\"http:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/hedge-fund-manager\/\">hedge fund manager<\/a> sets a hurdle rate at 5%, which is a standard annual rate.  If the fund garners a 50% return in one year, the manager will only collect performance fees for 45% of that gain.<\/p>\n<p>Though logically appealing, this practice has diminished as demand for hedge funds has outstripped supply and hurdles are now rare.<\/p>\n<p><a href=\"http:\/\/www.hedgeco.net\/\">Hedge funds<\/a> usually employ a high water mark, sometimes by itself, and sometimes in conjunction with a hurdle rate.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A hurdle rate is the minimum return necessary for a fund manager to start collecting incentive fees. The hurdle is usually tied to a benchmark rate such as Libor (London Interbank Offered Rate) or the one-year Treasury bill rate plus a spread. Hedge funds which specify a soft hurdle rate charge a performance fee based on the entire annualized return. [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,20],"tags":[6,63,61,62],"class_list":["post-84","post","type-post","status-publish","format-standard","hentry","category-hedge-fund-articles","category-managing-a-hedge-fund","tag-hedge-fund","tag-high-water-mark","tag-hurdle-rate","tag-performance-fee"],"_links":{"self":[{"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/posts\/84","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/comments?post=84"}],"version-history":[{"count":0,"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/posts\/84\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/media?parent=84"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/categories?post=84"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hedgeco.net\/hedgeducation\/hedge-fund-articles\/wp-json\/wp\/v2\/tags?post=84"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}