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:
“Norway, too, has noble prospects; and Lapland is remarkable for prodigious noble wild prospects. But, Sir, let me tell you, the noblest prospect which a Scotchman ever sees is the high road that leads him to England!”
—Samuel Johnson (1709–1784)
“It is moot whether there be divinities
As I finish this play by Webster:
The street-cars are still running however
And the katharsis fades in the warm water of a yawn.”
—Allen Tate (1899–1979)
“It is impossible to forget the sense of dignity which marks the hour when one becomes a wage-earner.... I felt that I had suddenly acquired value—to myself, to my family, and to the world.”
—Elizabeth Stuart Phelps (1844–1911)