The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, the riskier the project, the higher the hurdle rate. In the hedge fund world, hurdle rate refers to the rate of return that the fund manager must beat before collecting incentive fees.
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TERM OF THE DAY
Hurdle Rate
A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor. The hurdle rate denotes appropriate compensation for the level of risk present; riskier projects generally have higher hurdle rates than those that are deemed to be less risky.

In hedge funds, the hurdle rate refers to the rate of return that the fund manager must beat before collecting incentive fees.
Term Of The Day Selected By
Scott Bishop
Partner and Executive VP of Financial Planning
STA Wealth Management, LLC
Houston, TX

www.stawealth.com
Breaking it Down:
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Related Definitions
Accounting Rate of Return - ARR
The amount of profit, or return, that an individual can expect based on an investment made. Read More
Net Present Value - NPV
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