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:
“Parents do not give up their children to strangers lightly. They wait in uncertain anticipation for an expression of awareness and interest in their children that is as genuine as their own. They are subject to ambivalent feelings of trust and competitiveness toward a teacher their child loves and to feelings of resentment and anger when their child suffers at her hands. They place high hopes in their children and struggle with themselves to cope with their children’s failures.”
—Dorothy H. Cohen (20th century)
“I respect the ways of old folks, but the blood of a rooster or a goat cannot turn the seasons, change the course of the clouds and fill them up with water like bladders. The other night, at the ceremony for Legba, I danced and sang my fill: I am a black man, no? and I enjoyed it like a true Negro should. When the drums beat, I feel it in the pit of my stomach, I feel the itch in my hips and up and down my legs, I have got to join the party. But that is all.”
—Jacques Roumain (1907–1945)
“With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches, which in their eyes is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves.”
—Adam Smith (1723–1790)