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:
“What generous beliefs console
The brave whom Fate denies the goal!
If others reach it, is content:
To Heaven’s high will his will is bent.
Firm on his heart relied,
What lot soe’er betide,
Work of his hand
He nor repents nor grieves,
Pleads for itself the fact,
As unrepenting Nature leaves
Her every act.”
—Ralph Waldo Emerson (1803–1882)
“We have to learn how to come out of unclean situations cleaner than we were, and even how to wash ourselves with dirty water when we need to.”
—Friedrich Nietzsche (1844–1900)
“[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)