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:
“For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.”
—Bible: New Testament St. Paul, in Ephesians, 6:12.
St. Paul’s words were used by William Blake as an epigraph to The Four Zoas (c. 1800)
“The dominant and most deep-dyed trait of the journalist is his timorousness. Where the novelist fearlessly plunges into the water of self-exposure, the journalist stands trembling on the shore in his beach robe.... The journalist confines himself to the clean, gentlemanly work of exposing the griefs and shames of others.”
—Janet Malcolm (b. 1934)
“Modernity exists in the form of a desire to wipe out whatever came earlier, in the hope of reaching at least a point that could be called a true present, a point of origin that marks a new departure.”
—Paul De Man (1919–1983)