Performance Fee & Hurdle Rates – Understanding Your Manager’s Incentives

Every PMS or AIF charges performance fees after meeting defined benchmarks (hurdle rates). Knowing this math prevents surprises later.

Common Models
• Fixed + Performance: 1.5 % AMC + 20 % carry beyond 8 % hurdle.
• High-Water Mark (HWM): Fees apply only on new profits above previous NAV high.

Why It Matters
Transparent hurdles align manager motivation with investor success and prevent double-charging after drawdowns.

Key Takeaway: Fair fees follow fair rules – read the fine print before you sign.
 

Disclaimer: Educational only.