The use of target returns or performance targets by hedge fund managers in offering documents and marketing materials can potentially lead to negative consequences.  For example, Meredith Whitney’s Kenbelle Capital LP aimed for a target return of 12-17%; yet, when the fund returned -11%, BlueCrest Capital Management – its largest investor – filed a lawsuit to redeem its investment.  See “Citing Persistent Losses, Seed Investor BlueCrest Capital Sues Meredith Whitney and Her Hedge Fund for Return of Seed Capital,” Hedge Fund Law Report, Vol. 8, No. 10 (Mar. 12, 2015).  Other notable fund managers have lowered or revised their target returns in recent months, garnering negative press as a result.  Accordingly, hedge fund managers must take care when using target returns and first consider the potential risks and consequences of doing so.  This article, the first in a two-part series, discusses common practices for the use of target returns by hedge funds; analyzes reasons for using target returns; and highlights some potential drawbacks of using target returns.  The second article will analyze the legal risks associated with target returns and weigh the benefits of using target returns against such risks.