Hurdle rate — See preferred return.
Not every strategy uses a hurdle at all — many hedge funds rely solely on a high-water mark without a separate preferred return, and some venture funds omit a hurdle entirely, so the convention varies more by asset class than managers new to a strategy often expect.
Frequently asked questions
Is a hurdle rate the same as a preferred return?
Yes, the terms are generally used interchangeably to describe the minimum return investors receive before the manager participates in profits.
Do all funds have a hurdle rate?
No — convention varies significantly by strategy; many hedge funds rely on a high-water mark instead, and some venture funds have no hurdle at all.
Nothing on this page is legal, tax, or investment advice. SeRuM is not a registered broker-dealer, not a placement agent, and not an investment adviser.
Related
Preferred returnA threshold return investors receive before the manager participates in profits. Also callHigh-water markA provision preventing a manager earning performance fees on gains that merely recover priWaterfallThe order in which distributions are split between investors and the manager, through retu
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