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:
“Like an unseasonable stormy day,
Which makes the silver rivers drown their shores,
As if the world were all dissolved to tears,
So high above his limits swells the rage
Of Bolingbroke.”
—William Shakespeare (1564–1616)
“—the main jet
Struggling aloft unti it seems at rest
In the act of rising, until
The very wish of water is reversed,”
—Richard Wilbur (b. 1921)
“I am glad I made the late race. It gave me a hearing on the great and durable question of the age, which I could have had in no other way; and though I now sink out of view, and shall be forgotten, I believe I have made some marks which will tell for the cause of civil liberty long after I am gone.”
—Abraham Lincoln (1809–1865)