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 say God and the imagination are one . . .
How high that highest candle lights the dark.”
—Wallace Stevens (1879–1955)
“Panache upon panache, his tails deploy
Upward and outward, in green-vented forms,
His tip a drop of water full of storms.”
—Wallace Stevens (1879–1955)
“if we are to win
that title I want to see how.
But I don’t want to see
any marks when you’re dressed,
he said. He said, Now.”
—Gary Gildner (b. 1938)