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:
“What you have said
I will consider; what you have to say
I will with patience hear, and find a time
Both meet to hear and answer such high things.”
—William Shakespeare (1564–1616)
“What did it matter where you lay once you were dead? In a dirty sump or in a marble tower on top of a high hill? You were dead, you were sleeping the big sleep, you were not bothered by things like that. Oil and water were the same as wind and air to you.”
—Raymond Chandler (1888–1959)
“The unread story is not a story; it is little black marks on wood pulp. The reader, reading it, makes it live: a live thing, a story.”
—Ursula K. Le Guin (b. 1929)