Glossary › Hurdle rate

Hurdle rate: the minimum return before the performance fee

The hurdle rate is the minimum return a fund must achieve before the manager receives a performance fee.

with a hurdle rate79
without a hurdle15
Median where set5%
As at16 Oct 2026

Explanation

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.

In the database

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

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