Capella, for example, charges 1.5% a year in expenses and 20% of profits above a certain hurdle rate.

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For instance, Siemens, a German industrial giant, last year started assigning a different hurdle rate to each of its 16 businesses, ranging from household appliances to medical equipment and semiconductors.

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So a low profit margin hurdle rate could be a competitive advantage for Japanese companies competing internationally, particularly if it were a choice.

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The adviser must achieve a 7% annualized hurdle rate (1.75% quarterly) before earning any incentive fees.

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Then, by adding two known costs, the annual expense ratio and trading commissions, Barra computed what it calls a fund's hurdle rate.

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Why, you may ask yourself, should a fund's hurdle rate matter?

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GPs will be unwilling to rush to sell those investments at a loss or below their carry hurdle rate.

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Areas where LPs say they have witnessed changes in the past year include adjustments to management fees, rebates on deal-related fees and to a lesser extent reductions in the hurdle rate and changes to the carry structure.

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Suppose you found out its hurdle rate--trading costs plus management fees and other expenses--was a high 5% .

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