May 11 2013 at 21:33
Hi
I have a question about managers performance structure. When a manager says they get x% for profits with a high water mark is that on the account balance or account equity. Thanks
I have a question about managers performance structure. When a manager says they get x% for profits with a high water mark is that on the account balance or account equity. Thanks
May 13 2013 at 06:02
You gotta check with your account manager for their exact definition.
The trend is your friend!
May 13 2013 at 16:14
Thanks
May 14 2013 at 04:24
Account Equity is Standard for all high water mark calculations.
May 14 2013 at 12:22
Thanks for the help.
May 14 2013 at 21:13
folks if you don't know - don't confuse people.
here's the exact definition:
==============================
Investopedia explains 'High-Water Mark'
The high-water mark ensures that the manager does not get paid large sums for poor performance. So if the manager loses money over a period, he or she must get the fund above the high watermark before receiving a performance bonus. For example, say after reaching its peak a fund loses $100,000 in year one, and then makes $250,000 in year two. The manager therefore not only reached the high-water mark but exceeded it by $150,000 ($250,000 - $100,000), which is the amount on which the manager gets paid the bonus.
here's the exact definition:
==============================
Investopedia explains 'High-Water Mark'
The high-water mark ensures that the manager does not get paid large sums for poor performance. So if the manager loses money over a period, he or she must get the fund above the high watermark before receiving a performance bonus. For example, say after reaching its peak a fund loses $100,000 in year one, and then makes $250,000 in year two. The manager therefore not only reached the high-water mark but exceeded it by $150,000 ($250,000 - $100,000), which is the amount on which the manager gets paid the bonus.
arturas.sadauskas@
May 14 2013 at 21:15
should be calculated from balance. Equity involves too much uncertainty ( 'floating' money) and it makes no sense since client will be paying performance fee from equity and not closed positions aka balance at the end of a period.
arturas.sadauskas@
May 15 2013 at 06:54
Yes I agree, it should be from the account balance, not equity, that is how i do it to all of my managed account clients.
May 15 2013 at 08:24
If Equity is $100,000 and your Balance is $150,000. You can only withdraw the $100,000 right?
You can not charge a client a performance fee based on Account Balance until Equity equals the Account Balance.
Therefore, all trades must be closed or your performance Fee must be calculated from the current Equity status when Fee is calculated.
The Equity Amount must be higher than the concurrent month or No Performance Fee. You can not Hold your losses ( floating Equity is less than Account Balance) and expect to calculate a performance fee based on the Account Balance level.
You can not charge a client a performance fee based on Account Balance until Equity equals the Account Balance.
Therefore, all trades must be closed or your performance Fee must be calculated from the current Equity status when Fee is calculated.
The Equity Amount must be higher than the concurrent month or No Performance Fee. You can not Hold your losses ( floating Equity is less than Account Balance) and expect to calculate a performance fee based on the Account Balance level.
May 15 2013 at 08:33
Hmmm, you have a very good point there, yes you are right, i am a scalper where all of my trades are closed in seconds, so i never experience any condition where my balance is for example 150,000 but equity is 100,000 due to floating loss caused by long term trading or hedging, thanks for clearing it up :)
