medium · Private Equity & LBOs

A sponsor's 'Hurdle Rate' (or Preferred Return) is typically structured as:

1. An 8.0% annual compounded return that must be paid to LPs before the GP can receive carried interest.
2. A fixed percentage of the total fund size paid annually to cover operating expenses.
3. The maximum amount of debt that a fund can use to finance its portfolio companies.
4. A performance fee paid to the GP only if the fund achieves a MOIC of at least 2.0x.

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