LIC & LIT Out-performance fees - what does "previous high water mark" mean?

I’ve noticed CDM come up once or twice here. The attached IIR report has a nice little review at section8. Ignore the rest I’m sure you don’t want the sparkling new (ominously named) CDO.

As a performance hurdle for outperformance fees, what does “previous high water mark” mean?

Cheers!

 

First indicators to throw proposals in the bin. Obfuscation and circumlocution. If it ain't clear this simple brain cannot understand it so I don't want it.

 

"Dont confuse brains with a bull market"! -Charles Ellis.

 

My apologies @Pleep as I've realised no one has answered your question about high water mark.

My understanding it is the highest level the fund has reached usually in terms of the NTA. If it drops below that mark the manager doesn't get a bonus and must get it above it in the future for the bonus, whatever form it takes, to be paid.

I feel it's a bit iffy as there are external events out of the managers control which could impact the values.

It's yonks ago since I looked at this type of fee payment and the situation may have changed since then. Others may be able to provide more current knowledge.

 

Thanks @SatayKing
Sounds a bit iffy to me too. But was just curious.
I think my post got moved because putting such a blasphemous LIC IPO up in lights created offense!
Kidding

 

Hehe, be careful of what you wish for. It could end up with each post having it's own separate thread.

 

It is intended for the following scenario:
Year 1 - fund underperforms, in the red, manager gets no bonus (only their six figure salary) So sad for them.
Year 2 - fund outperforms, 20%+ returns, big bonus for the fund managers.

But wait a minute you are only back to where you started. In 2 years your funds have gone nowhere. High watermark is intended to prevent this scenario.

 

Than

Thanks @Blueskies.
That makes it clearest of all.