Performance Fee Hurdle Calculator

Promote starts above preferred return. This calculator shows trigger math.

LP equity

Preferred return %

Total distributions

Hold years

Hurdle threshold (total)

$11,754,625

Excess over hurdle

$2,745,375

Hurdle met (1=yes)

How the math works

Hurdle = equity × (1+pref)^years (compound pref). Excess above hurdle subject to promote split.

On $8M LP equity with 8% pref over 5 years: hurdle = $11.76M. If distributions total $14.5M, $2.74M is above-hurdle — subject to promote split (often 20% to GP = $548k promote). Above-pref performance is where GP earns its economics.

How to Use

Enter LP equity.
Enter preferred return %.
Enter total distributions.
Enter hold period years.
Read hurdle threshold and promote trigger.

Frequently Asked Questions

Hurdle structure?

Typical: 8% pref to LP. Then 50/50 catch-up to GP until GP has caught up to its 20% share. Then 80/20 thereafter. Alternative: straight 8% pref, then 80/20 with no catch-up. Catch-up accelerates GP promote earning on moderately above-pref deals.

Compounding?

Most pref compounds annually (on unreturned capital). Some simple interest. Huge dollars at stake: 8% compound on $10M unreturned over 7 years = $7.14M pref. Simple = $5.6M. Sponsor prefers simple; LP prefers compound.

Clawback?

If sponsor collected promote early but final returns fall below pref threshold, sponsor returns promote (clawback). Institutional deals require. Smaller syndications often lack — LP risk.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.