This also applies to mutual funds though variably. A hurdle, in the context of a performance fee, is a level of return that the fund must beat before it can charge a performance fee. It may be a set percentage or it may be referenced to an index. The index would typically be either LIBOR (or an equivalent) or an index reflecting the underlying market in which the fund is investing. The purpose of the latter is to reward the fund for generating returns that are better than the market (alpha) rather than for returns generated simply by movement in the market as a whole. If, in the worked example, there had been a hurdle of 4%, the performance fee would only have been charged on the additional 6% increase rather than the full 10% increase in NAV. As hurdles reduce the size of performance fees and reward successful active management, they are popular with investors. However, as demand for hedge funds has been high in recent years, fewer hedge funds have needed to resort to their use to attract investors. As well as a performance fee, a hedge fund will charge a management fee, typically calculated as 1.50% to 2% of the NAV of the fund, regardless of whether the fund has generated any returns for the investor. Hedge funds may also pay fees to administrators, prime brokers, lawyers, accountants and other service providers. While this article uses the term "NAV" for simplicity, in reality a performance fee would be charged by reference to the NAV "per share" (being the net asset value divided by the number of shares in issue). The NAV will fluctuate as investors subscribe for and redeem shares, whereas the NAV per share will only fluctuate as the underlying investments increase or decrease in value, making the latter the appropriate measure for calculating a performance fee. Where a hedge fund is structured as a limited partnership or unit trust, the terms "interest" and "unit" should be substituted for "share".