what is a hurdle rate 
a hurdle rate is the lowest rate of return a project or investment must achieve before a manager or investor deems it acceptable it s important when companies or investors make important decisions like pursuing a specific project riskier projects generally have higher hurdle rates than those with less risk the term is also often used in private equity investing and hedge fund management for example in a private equity investment fund the general partner gp can only charge performance fees known as carried interest if the limited partner s rate of return crosses the prearranged hurdle rate investopedia sydney burnshurdle rate factorsthe hurdle rate balances the need for profit with the risks and costs involved this concept is crucial in guiding individual and corporate investment strategy decisions 