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High Water Mark for manager's fees

CrazyTrader (CrazyTrader)
May 15 2013 at 13:22
1718 posts
SiamFXNET posted:
If Equity is $100,000 and your Balance is $150,000. You can only withdraw the $100,000 right?

That's wrong totally wrong! Your broker will never let you do that. I let you think about it!!!

May 15 2013 at 16:16
28 posts
Guys... high water mark is simple.

Your 'fund manager' or 'money manager' simply charges a fixed percentage (agreed at the beginning of the investment) of what ever your investment sum is in the green, either month on month (typically) or annually...

Manager' typically charge 20% high water mark, month on month...

To give you an example:

£10,000 invested.

January: +4% = £400.00 = Manager's high water mark of 20% = £80.00 = Investment £10,320.00

February: -2% = -£206.40 = Manager gets nothing... = £10,113.60

March: +2% = £202.27 = Manager gets nothing... = £10,315.87

April: +3% = £309.47 = Manager's high water mark of 20% = (March £10,315.87 - Jan £10,320 = £4.13 - £309.47 = £305.34 / 20% = £61.07 (Manager Charge) = Investment £10,564.27

And so on...

It's great for the fund manager's because they're taking 0 risk and if they remain liquid (investment funds running in and out etc.) it means that every individual investor's performance isn't going to be identical. Therefore the fund managers are typically getting paid most of the time (depending on their consistency of course!)

The reason why the manager gets nothing in the month of March is because they only get paid based upon new equity high's which is typically calculated on a month end basis.

High water mark is the best choice for an investor because they know that the hedge fund manager (or what ever) is not getting paid unless you are...

CopperCM (CopperCM)
May 15 2013 at 18:20
8 posts
Thanks for all the help. The questions that you have discussed are the ones that I was trying to answer. Thanks for all the input.

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