Economics · Hedge Funds & Investment Management
The High Water Mark (HWM) in a hedge fund ensures that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The GP earns performance fees only on new profits, not on recovery of past losses✓
- 2The fund cannot decline below its initial Net Asset Value (NAV)
- 3LPs pay fees only when the fund is profitable
- 4The GP earns performance fees every year regardless of returns
Correct answer
The GP earns performance fees only on new profits, not on recovery of past losses
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