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:
“Whenever I dove in a breast high shoal,
Wherever I ramped in the clover quilts,
Whatsoever I did in the coal-
Black night, I left my quivering prints.”
—Dylan Thomas (1914–1953)
“Dying smokers sense
Walking towards them through some dappled park
As if on water that unfocused she
No match lit up, nor drag ever brought near....”
—Philip Larkin (1922–1986)
“One of the marks of a truly vigorous society is the ability to dispense with passion as a midwife of action—the ability to pass directly from thought to action.”
—Eric Hoffer (1902–1983)