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:
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The people or the already lofty mountains,
I’d elevate the already lofty mountains.
The only fault I find with old New Hampshire
Is that her mountains aren’t quite high enough.”
—Robert Frost (1874–1963)
“Here is no water but only rock
Rock and no water and the sandy road
The road winding above among the mountains
Which are mountains of rock without water
If there were water we should stop and drink
Amongst the rock one cannot stop or think”
—T.S. (Thomas Stearns)
“Judge—A law student who marks his own examination-papers.”
—H.L. (Henry Lewis)