Glossary › Hurdle rate
The hurdle rate is the minimum return a fund must achieve before the manager receives a performance fee.
Without a hurdle the manager earns a performance share even on returns the market would have delivered anyway. With a hurdle of, for example, 5% a year the fee only applies to the part of the return above it. For credit funds the threshold is partly linked to interest rates; for equity funds a fixed rate is common.
The small print matters. A “hard” hurdle gives the manager a share of the excess return only. A “soft” hurdle with catch-up lets the manager catch up once the threshold is passed until the full share of the entire gain is reached – the hurdle then only shifts the timing. Whether it resets every year or accumulates over several years also changes the fee considerably.
Of the 97 active funds with a performance fee, 79 state a hurdle rate, 15 none; for 3 the information is missing. Where there is a hurdle, the median is 5% a year.
Lowest, middle and highest hurdle rate · as at 16 Oct 2026