High-Water Mark

AAA

DEFINITION of 'High-Water Mark'

The highest peak in value that an investment fund/account has reached. This term is often used in the context of fund manager compensation, which is performance based.

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.

RELATED TERMS
  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
  3. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  4. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  5. High Close

    A tactic used by stock manipulators; they make small trades at ...
  6. Portfolio Management

    The art and science of making decisions about investment mix ...
Related Articles
  1. Savings

    Are Equity-Indexed Annuities Right For You?

    Equity-indexed annuities can be confusing to understand, but for conservative investors, they can be valuable savings plans.
  2. Mutual Funds & ETFs

    Should You Follow Your Fund Manager?

    Learn how to tell if a fund in flux is still a suitable investment.
  3. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  4. Mutual Funds & ETFs

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  5. Professionals

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  6. Mutual Funds & ETFs

    Are These 2015's Most Promising Mutual Funds?

    For 2015, the mutual funds covered below are likely to offer more upside potential than the vast majority of mutual funds in existence.
  7. Mutual Funds & ETFs

    Why These Could Be 2015's 10 Best Mutual Funds

    These 10 mutual funds offer strong potential for 2015. Here's why.
  8. Professionals

    State Street Slashes ETF Fees

    State Street has slashed fees on 41 of its ETFs in the wake of historic redemptions.
  9. Stock Analysis

    Will Spinoffs Give American Capital A Pop?

    American Capital shareholders have long awaited a plan to spin off the company's investments from its prized asset-management business.
  10. Mutual Funds & ETFs

    Pimco and Vanguard: A Tale of Two Fund Managers

    A look at the similarities and differences of asset management giants Pimco and Vanguard.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center