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:
“Barbarisation may be defined as a cultural process whereby an attained condition of high value is gradually overrun and superseded by elements of lower quality.”
—Johan Huizinga (1872–1945)
“It is moot whether there be divinities
As I finish this play by Webster:
The street-cars are still running however
And the katharsis fades in the warm water of a yawn.”
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“Modernity exists in the form of a desire to wipe out whatever came earlier, in the hope of reaching at least a point that could be called a true present, a point of origin that marks a new departure.”
—Paul De Man (1919–1983)