Definitions for "hurdle rate"
The required rate of return in a discounted cash flow analysis, above which...
A minimum rate of return required before an investor will make an investment and before the management takes part by the carried interest.
Arrangement that caps the downside risk for investors. It allows investors to get preferential access to the profits of the partnership. In the absence of reaching the hurdle return, general partners will not receive a share of the profit (carried interest). A hurdle rate of 10% means that the private equity fund needs to achieve a return of at least 10% before the profits are shared according to the carried interest arrangement.