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:
“We approached the Indian Island through the narrow strait called “Cook.” He said, “I ‘xpect we take in some water there, river so high,—never see it so high at this season. Very rough water there, but short; swamp steamboat once. Don’t paddle till I tell you, then you paddle right along.” It was a very short rapid. When we were in the midst of it he shouted “paddle,” and we shot through without taking in a drop.”
—Henry David Thoreau (1817–1862)
“What’s water but the generated soul?”
—William Butler Yeats (1865–1939)
“Now only a dent in the earth marks the site of these dwellings, with buried cellar stones, and strawberries, raspberries, thimble-berries, hazel-bushes, and sumachs growing in the sunny sward there.... These cellar dents, like deserted fox burrows, old holes, are all that is left where once were the stir and bustle of human life, and “fate, free will, foreknowledge absolute,” in some form and dialect or other were by turns discussed.”
—Henry David Thoreau (1817–1862)