| High Watermark | |
 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. |
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 The high watermark 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 watermark but exceeded it by $150,000 ($250,000 - $100,000), which is the amount on which the manager gets paid the bonus. |
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 Mutual Fund Basics Tutorial - Learn about the basics--and the pitfalls!--of investing in mutual funds. Should You Follow Your Fund Manager? - If he or she has left, you need to re-evaluate a big factor affecting whether the fund is still suitable for you. |
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