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Chart of the Week: Is An 8% Hurdle Too High In Today’s Economic Environment?

Buyouts and VCJ’s PE/VC Partnership Agreement Study 2012-2013 indicated that 58.3 percent of North American buyout shops employ an 8 percent rate. Is that too high when 10-year Treasuries offer a rate around 2 percent? Oaktree Capital Group LLC’s Chairman Howard Marks and The Blackstone Group’s President and Chief Operating Officer Hamilton “Tony” James talked about the issue when their respective firm’s reported fourth-quarter earnings, but both agreed lowering hurdle rates is unlikely. Some firms in the study’s sample have a lower hurdle. A couple of Kohlberg Kravis Roberts & Co.’s newest funds are set at 7 percent. (Click the link at right for a larger version of the chart.)