What is the "High‑Water Mark" Performance Fee?
The High‑Water Mark mechanism ensures that performance fees are only charged on returns that push the investment value to a new historical high, protecting your interests.
Under this method, fees are accrued only when the cumulative asset value reaches a new peak on the performance calculation date. The fee is applied only to the portion of value that exceeds the highest NAV recorded on any previous calculation date. In simple terms: the Investment Manager is only entitled to performance fees if the asset value beats its previous best performance.
Example 1:
Mr. A invests USD 10,000 in January.
- July: Account profit = USD 2,000 → NAV = USD 12,000
Fee charged: USD 2,000 × 20% = USD 400
"High‑Water Mark" updated to USD 12,000
- December: Total profit = USD 2,300 → NAV = USD 12,300
Only the excess USD 300 above the previous high is charged: USD 300 × 20% = USD 60
- If NAV later drops to USD 11,500: No fee is charged, as it does not exceed the high‑water mark of USD 12,000.
Example 2:
Accrual dates: March 20 and September 20 annually (postponed to next business day if holiday).
- Sep 22, 2020: Investment = USD 1.00
- Mar 22, 2021: NAV = 1.1000 → New High → Fee Accrued
- Sep 20, 2021: NAV = 1.2000 → New High → Fee Accrued
- Mar 22, 2022: NAV = 1.1000 → No new high → No fee
- Sep 20, 2022: NAV = 1.2500 → New High → Fee Accrued
Performance fees are calculated only on absolute returns exceeding the historical high‑water mark.
