In its Investment Management Fees: Fairness Revisited report, investment consultancy bfinance stated sectors such as hedge funds and private markets have kept their hurdle fees “static” despite higher “risk-free” rates. A hurdle rate is the minimum profit or returns a hedge fund must earn before charging a fee.
More specifically, in sectors where expected returns have increased as a direct result of higher interest rates, including hedge funds and private debt, the lack of change in hurdle rates has resulted in “greater overall fee leakage” and a higher percentage of overall return going…