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:
“The way to go to the circus, however, is with someone who has seen perhaps one theatrical performance before in his life and that in the High School hall.... The scales of sophistication are struck from your eyes and you see in the circus a gathering of men and women who are able to do things as a matter of course which you couldn’t do if your life depended on it.”
—Robert Benchley (1889–1945)
“It is so manifestly incompatible with those precautions for our peace and safety, which all the great powers habitually observe and enforce in matters affecting them, that a shorter water way between our eastern and western seaboards should be dominated by any European government, that we may confidently expect that such a purpose will not be entertained by any friendly power.”
—Benjamin Harrison (1833–1901)
“Semantically, taste is rich and confusing, its etymology as odd and interesting as that of “style.” But while style—deriving from the stylus or pointed rod which Roman scribes used to make marks on wax tablets—suggests activity, taste is more passive.... Etymologically, the word we use derives from the Old French, meaning touch or feel, a sense that is preserved in the current Italian word for a keyboard, tastiera.”
—Stephen Bayley, British historian, art critic. “Taste: The Story of an Idea,” Taste: The Secret Meaning of Things, Random House (1991)