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:
“Have you ever been up in your plane at night, alone, somewhere, 20,000 feet above the ocean?... Did you ever hear music up there?... It’s the music a man’s spirit sings to his heart, when the earth’s far away and there isn’t any more fear. It’s the high, fine, beautiful sound of an earth-bound creature who grew wings and flew up high and looked straight into the face of the future. And caught, just for an instant, the unbelievable vision of a free man in a free world.”
—Dalton Trumbo (1905–1976)
“A slight relax of air where cold was
And water trickles ...”
—Philip Larkin (1922–1986)
“Hair of man, man-hair, hair of
breast and groin, marking contour as
silverpoint marks in cross-
hatching ...”
—Denise Levertov (b. 1923)