Advantages and disadvantages of hurdle rates

It is, however, a flawed approach for the following reasons:

Advantages and disadvantages of hurdle rates

Silver-rated Baird Short-Term Bond Fund exhibits a number of characteristics that make it a compelling offering in its category, regardless of where the Federal Reserve takes interest rates. Second, there is a policy of absolutely no derivatives or leverage in the fund, which limits volatility versus more aggressive peers.

Third, the fees on this fund are some of the lowest in the category, and in a category where yields are already quite low, this gives the fund an advantage over competitors who have a much higher price hurdle that they have to overcome.

Those short-term bond funds are, by design, less vulnerable to broad market moves. This particular fund within this category is thoughtfully structured to remain resilient, regardless of where the Federal Reserve takes interest rates. Morningstar analysts assign the ratings on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating.

Advantages and disadvantages of hurdle rates

If a fund receives a positive rating of Gold, Silver, or Bronze, it means Morningstar analysts think highly of the fund and expect it to outperform over a full market cycle of at least five years.

It cannot assess whether a fund is the right fit for a particular portfolio and risk tolerance. Morningstar evaluates funds absed on five key pillars — Process, Performance, People, Parent, and Price.

Analysts assign a rating of Positive, Neutral, or Negative to each pillar. Fund with advantages that outweigh the disadvantages across the five pillars and with sufficient level of analyst conviction to warrant a positive rating. Fund with notable advantages across several, but perhaps not all, of the five pillars.

The fund received three stars for the three-year period among Short-Term Bond Funds, four stars for the five-year period among Short-Term Bond Funds and three stars for the ten-year period among Short-Term bond Funds, as of November 30, Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.

Past performance is no guarantee of future results. The average annual total returns for the Barclays U. Performance data quoted represents past performance. Past performance does not guarantee future results. Investment results assume all distributions are reinvested and reflect applicable fees and expenses.

For performance current to the most recent month-end, please visit bairdfunds. Indices are unmanaged and are not available for direct investment. The Fund may invest in mortgage- and asset-backed securities which may be subject to prepayment risk and thus may be more sensitive to interest rate changes than other types of debt securities.

The Fund may also invest in U. Investment grade investments are those rated from highest down to BBB- or Baa3.

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Investors should consider the investment objectives, risks, charges and expenses of the fund carefully before investing.

This and other information is found in the prospectus and summary prospectus. For a prospectus or summary prospectus or for performance current to the most recent month-end, please visit www.

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The Trouble with Divisional Hurdle Rates Stephen F. Thode 62 Stephen F. Thode is an assistant professor of finance at Lehigh University in Beth- lehem, Pennsylvania. Formerly he served as a member of the technical staff in the Financial Modeling Group of Bell Labo- ratories.

While net present value (NPV) calculations are useful when you are valuing investment opportunities, the process is by no means perfect. However, if you raise the discount rate from 5% to 10%, you.

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Advantages and Disadvantages of Internal Rate of Return (IRR)