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:
“But look, the morn in russet mantle clad
Walks o’er the dew of yon high eastward hill.”
—William Shakespeare (1564–1616)
“Our star was brighter perhaps when it had water in it.
Now there is no question even of that, but only
Of holding on to the hard earth so as not to get thrown off,
With an occasional dream, a vision ...”
—John Ashbery (b. 1927)
“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)