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:
“How high they build hospitals!
Lighted cliffs, against dawns
Of days people will die on.”
—Philip Larkin (1922–1986)
“Cities give not the human senses room enough. We go out daily and nightly to feed the eyes on the horizon, and require so much scope, just as we need water for our bath.”
—Ralph Waldo Emerson (1803–1882)
“Hair of man, man-hair, hair of
breast and groin, marking contour as
silverpoint marks in cross-
hatching ...”
—Denise Levertov (b. 1923)