What is the High Watermark?
The High Watermark (HWM) is the highest point a client's account has reached in terms of net worth.
📌 In other words:
It is the highest benchmark achieved through previous profits and is used to calculate whether performance fees should be applied.
When are commissions charged?
Performance commissions only apply if the copier continues to generate profits above their previous High Watermark.
If you exceed your High Watermark, a commission applies.
If you don't exceed it, no commission applies.
How is the High Watermark updated?
Each time new profit is generated and the corresponding commission is charged:
The profit is calculated.
The supplier's commission is deducted.
The remaining amount (net profit) becomes the new HWM.
Example:
You earn £200
You pay £40 commission (20%)
Your new High Watermark will be £160
What if there are losses?
If the copier suffers losses, the HWM remains unchanged.
It remains the same until:
You recover the losses, and
You make additional profits that exceed the HWM.
Only then are the commissions applied again.
Summary
Situation | Is there a performance fee? |
Gain exceeds HWM | ✅ Yes |
Gain that does not exceed the HWM | ❌ No |
Losses (without recovering the HWM) | ❌ No |
Losses + recovery + new gains | ✅ Yes |
Why is the HWM important?
The High Watermark protects investors by:
No fees paid on "repeated" profits
No fees charged after a recovery without real new profits
Ensures that fees are only charged when there are new net profits