Do high water marks in HFs apply to later investors?
I understand that current investors will not pay any performance fees to a HF if the HF's AUM is down from the HWM, only the management fee. However, if new investors come into the fund after the fund suffered losses below the HWM and is trying to catch up, are these new investors also exempt from paying performance fees until HF reaches it's historical HWM?
No, the HWM is by investor. The whole idea is that an investor shouldn’t pay fees twice (for the performance on the way up and then after the drawdown when they have already paid). If a HF is in a drawdown and a new investor comes along, they will pay for any performance they accrue (as they haven’t paid fees on this already).
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