Groundlearn / Glossary / Hurdle rate
Hurdle rate
A CFA term, defined in plain English with the distinction examiners test.
What it means
The minimum return a fund must deliver before the manager earns an incentive fee.
The exam angle
A hard hurdle charges only on returns above it; a soft hurdle charges on the whole gain once it is cleared.
Where it appears in the syllabus
- Alternative InvestmentsCFA Level I · exam weight 6–9% · Private capital, real estate, natural resources, hedge funds, digital assets.
Related terms
- Capital callThe general partner’s demand that limited partners transfer part of their committed capital.
- Capitalisation rateNet operating income divided by property value — a property’s unlevered income yield.
- Carried interestThe general partner’s share of a private fund’s profits, typically around 20%.
- Contango and backwardationContango is a futures price above the spot price; backwardation is a futures price below it.
- Distribution waterfallThe agreed order in which a private fund’s proceeds are shared between limited and general partners.
- General partnerThe manager of a private fund, responsible for investment decisions and bearing unlimited liability for the partnership.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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