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Hurdle Rate
Fund at the beginning of the year =100m, value at the year end = 120m, fund manager is entitled for a fee of 2% base fees & 10% incentive fee, hurdle rate 5%. So you can see fund manager has earned a return of 20% [(120-100)/100]*100 .. therefore this 20% is compared.to hurdle rate 5%, since manRead more
Fund at the beginning of the year =100m, value at the year end = 120m, fund manager is entitled for a fee of 2% base fees & 10% incentive fee, hurdle rate 5%.
So you can see fund manager has earned a return of 20% [(120-100)/100]*100 .. therefore this 20% is compared.to hurdle rate 5%, since manager earned a return of 20% which is greater than 5%. We will reward the manager with 10% incentive fees.
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