Which of the following is the term used to link the hedge fund manager's incentives more closely to those of the fund investors and to reduce the manager's incentive to increase the risk of trades?

Question

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High-water marks are used to ensure that hedge fund managers are rewarded for net positive returns, rather than simply generating fees through high volumes of transactions or taking excessive risks. This aligns their incentives more closely with those of the investors, as managers must surpass the previous highest value of the fund before they can collect performance fees again, thus discouraging risky behavior that could harm the fund's long-term performance.

Which of the Following Is the Term Used to Link