High-Water Mark

What is a High-Water Mark?

An investment concept designed to ensure fair compensation for fund managers. It reflects the highest value an investment fund or account has achieved and is commonly used in performance-based fee structures to safeguard investors from paying unnecessary or excessive fees.

Key Features of a High-Water Mark

1. Performance fees for fund managers are earned only when the fund's value surpasses its previous peak.

2. This ensures investors aren’t charged fees:

• For poor performance.

• On gains already achieved in the past.

Why is a High-Water Mark Important?

• Fair Fees: You only pay performance fees when the fund achieves new performance highs.

• Protects Investors: Prevents fees from being charged for recovering losses or for gains already realized.