High Water Marks
The highest NAV of a fund to date is known as the "high water mark". If the NAV of a fund declines during a year, no performance fee will be payable to the investment manager. If the NAV subsequently increases over the following year back to the high water mark (but no higher), it would be objectionable for the investor to be charged a performance fee on that increase because the investor has not yet made any return on its investment. Therefore, to address this concern, hedge funds will typically only charge a performance fee on increases in NAV over the high water mark.
Read more about this topic: Performance Fee
Famous quotes containing the words high, water and/or marks:
“Tragedy is always a mistake; and the loneliness of the deepest thinker, the widest lover, ceases to be pathetic to us so soon as the sun is high enough above the mountains.”
—Margaret Fuller (1810–1850)
“Here is no water but only rock
Rock and no water and the sandy road
The road winding above among the mountains
Which are mountains of rock without water
If there were water we should stop and drink
Amongst the rock one cannot stop or think”
—T.S. (Thomas Stearns)
“I regard almost all quarrels of princes on the same footing, and I see nothing that marks man’s unreason so positively as war. Indeed, what folly to kill one another for interests often imaginary, and always for the pleasure of persons who do not think themselves even obliged to those who sacrifice themselves for them!”
—Mary Wortley, Lady Montagu (1689–1762)