Hurdle rate - mnemonic rule?

CFA Level I Alternative Investments
#1

Hi all,

It seems I can’t manage to remember the difference between Soft hurdle and Hard hurdle. When I read about it and do some exercises is becomes again crystal clear to me and I completely understand how it works. However, after a few weeks I happen to always forget the difference between them.

Do you have any useful mnemonic rule or trick to not forget them?

Thanks

#2

Back in Level 1, I used to remember “Hard” to mean the fund manager has to work harder to earn the incentive fee, cause the incentive fee will be based on gains net of the hurdle amount (i.e. lower incentive fee compared to soft hurdle).

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#3

Interesting! Thanks for the hint :slight_smile:

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