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:
“They talk about their Pilgrim blood,
Their birthright high and holy!
A mountain-stream that ends in mud
Methinks is melancholy.”
—James Russell Lowell (1819–1891)
“We’ve only just begun to learn about the water and its secrets, just as we’ve only touched on outer space. We don’t entirely rule out the possibility that there might be some form of life on another planet. Then why not some entirely different form of life in a world we already know is inhabited by millions of living creatures?”
—Harry Essex (b. 1910)
“[Children] do not yet lie to themselves and therefore have not entered upon that important tacit agreement which marks admission into the adult world, to wit, that I will respect your lies if you will agree to let mine alone. That unwritten contract is one of the clear dividing lines between the world of childhood and the world of adulthood.”
—Leontine Young (20th century)