Hey there,
Curious as to what people are seeing for the hurdle rates (preferred returns) for funds and similarly structured JVs (i know there is a lot more to this...but talking directionally).
Historically, 8% to 10% for the pref has been common but that was when interest rates where minimal. Now that rates have significantly popped, are you seeing this pref hold steady or is this creeping up with interest rates?
For avoidance of doubt, i'm referring to the hurdle rates that the LP equity earns on invested capital before the GP starts earning any promote.
thx
This topic has come up a lot, but in most cases I have seen it stay around 8%. I know of some conversations around setting it to a spread with a cap, but I don’t have any data points on this concept actually being implemented. This item is theoretically always up for negotiation, but in practice, the industry seeks fine with 8% over a 10-year horizon. I think rates would need to go higher to see more movement.
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