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:
“People nowadays have such high hopes of America and the political conditions obtaining there that one might say the desires, at least the secret desires, of all enlightened Europeans are deflected to the west, like our magnetic needles.”
—G.C. (Georg Christoph)
“—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)
“Hair of man, man-hair, hair of
breast and groin, marking contour as
silverpoint marks in cross-
hatching ...”
—Denise Levertov (b. 1923)