A high water mark is a limiting factor of hedge fund manager compensation. This means that managers cannot charge incentive fees ________.

Question

Quizplus · Accepted Answer

A high water mark ensures that managers can only charge incentive fees when a fund exceeds its previous high value. If the fund falls and does not recover to its previous high, the manager cannot charge incentive fees on that portion of the fund's value. Therefore, option B is the correct choice as it accurately defines the scenario where managers cannot charge incentive fees.

A High Water Mark Is a Limiting Factor of Hedge