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:
“A man is free to go up as high as he can reach up to; but I, with all my style and pep, can’t get a man my equal because a girl is always judged by her mother.”
—Anzia Yezierska (c. 1881–1970)
“Rock of ages, cleft for me,
Let me hide myself in thee!
Let the water and the blood,
From thy riven side which flowed,
Be of sin the double cure;
Cleanse me from its guilt and pow’r.”
—Augustus Montague Toplady (1740–1778)
“Semantically, taste is rich and confusing, its etymology as odd and interesting as that of “style.” But while style—deriving from the stylus or pointed rod which Roman scribes used to make marks on wax tablets—suggests activity, taste is more passive.... Etymologically, the word we use derives from the Old French, meaning touch or feel, a sense that is preserved in the current Italian word for a keyboard, tastiera.”
—Stephen Bayley, British historian, art critic. “Taste: The Story of an Idea,” Taste: The Secret Meaning of Things, Random House (1991)