- Introduce yourself - What is a Hurdle rate

Question

Accepted Answer

A hurdle rate is the minimum rate of return required by an investor to invest in a project or fund.

Hurdle rate is used to determine if an investment is worth pursuing
It is usually set above the risk-free rate of return
If the investment does not meet the hurdle rate, it is considered not profitable
Hurdle rate varies depending on the investor's risk tolerance and the nature of the investment
Example: A hedge fund may have a hurdle rate of 10%, meaning they will only invest in projects that can generate a return of at least 10%
Example: A private equity firm may have a hurdle rate of 20%, meaning they will only invest in projects that can generate a return of at least 20%

Accepted Answer

Hurdle rate is minimum required rate of return which a fund has to achieve for the Investment Manager to earn performance fees. There is further concept of soft hurdle rate and hard hurdle rate. Soft hurdle rate means performance fees will be paid on entire profit earned if the hurdle rate is achieved and Hard hurdle rate means performance fees will be paid on excess above benchmark.

Accepted Answer

Hurdle rate is the minimum retuns that need to by achieved by general parterns in order to get incentives. In other words hurdle is the guarentted retun from fund to limited partners. Hurdle rate is also called prefered retun.

In the distribution :there r preference of payments. Having four tires of distribution.

Tire 1- capital retun to lps

Tire 2- hurdle rate /prefered return

Tire 3-catch up trench

Tire4 -carried intrest (will be clclulated using water fall provisions)

Accepted Answer

A hurdle charge is the minimum fee of go back on a mission or funding required by using a manager or investor. It lets in companies to make critical selections on whether or not to pursue a specific task. The hurdle fee describes the appropriate reimbursement for the extent of hazard gift—riskier initiatives normally have higher hurdle quotes than people with much less hazard.

Accepted Answer

A hurdle charge is the minimum fee of go back on a mission or funding required by using a manager or investor. It lets in companies to make critical selections on whether or not to pursue a specific task. The hurdle fee describes the appropriate reimbursement for the extent of hazard gift—riskier initiatives normally have higher hurdle quotes than people with much less hazard.

Accepted Answer

A hurdle charge is the minimum fee of go back on a mission or funding required by using a manager or investor. It lets in companies to make critical selections on whether or not to pursue a specific task. The hurdle fee describes the appropriate reimbursement for the extent of hazard gift—riskier initiatives normally have higher hurdle quotes than people with much less hazard.

- Introduce yourself - What is a Hurdle rate

Citco Fund Accountant interview questions & answers

Popular interview questions of Fund Accountant