A hedge fund high watermark is an accounting technique that is used to ensure that managers do not charge a performance fee for the past period or even at all this period when the fund had poor performance. A few years back only one out of ten hedge funds earned performance fees throughout the year, but today this figure has risen to more than half. As a result, the fund manager is able to get a lot more return on his investment, which is what he wants. Unfortunately for the investor, this rise in performance fee payments means that he will have less profit to pass on to him as the portfolio grows.
The popularity of these types of hedge funds has also increased. Today people tend to prefer these types of funds to the traditional variety, and it is often quite difficult to find a decent one, despite the efforts of some people. If you are looking for a hedge fund that meets all your requirements then there are certain criteria you should look for when looking for a fund manager.
A high water mark fund should have high levels of quality, liquidity, and growth potential. If you are looking for a hedge fund that invests in bonds then the fund manager must be very experienced in this area as well. However, if you are looking for a fund that invests in stocks then he needs to have a good knowledge of the stock market.
The manager needs to be very flexible and willing to negotiate with the fund if need be when it comes to paying the high-performance fee. You will probably have to pay him the high-performance fee as well as regular performance fees. The manager will be concerned about the overall performance of the fund. If the returns for the past three years or so are below the standards expected he may decide to reduce the level of risk being taken by the manager.
Another important thing to consider is that the fund manager is the person who will be responsible for maintaining the balance sheet and ensuring that the portfolio is well diversified. This means that he will be in charge of the day to day operations of the fund. He will also be responsible for the management of the business affairs of the fund.
The fund manager should be willing to meet with you and discuss your financial objectives before you decide to invest in the fund. He should be able to explain why the investment portfolio will yield a high return.