Groundlearn / Glossary / High-water mark
High-water mark
A CFA term, defined in plain English with the distinction examiners test.
What it means
The highest value an investor’s holding has previously reached, above which incentive fees are charged.
The exam angle
Stops the manager charging twice for recovering the same losses. It does not stop them closing the fund and starting again.
Where it appears in the syllabus
- Alternative InvestmentsCFA Level I · exam weight 6–9% · Private capital, real estate, natural resources, hedge funds, digital assets.
Related terms
- Capital callThe general partner’s demand that limited partners transfer part of their committed capital.
- Capitalisation rateNet operating income divided by property value — a property’s unlevered income yield.
- Carried interestThe general partner’s share of a private fund’s profits, typically around 20%.
- Contango and backwardationContango is a futures price above the spot price; backwardation is a futures price below it.
- Distribution waterfallThe agreed order in which a private fund’s proceeds are shared between limited and general partners.
- General partnerThe manager of a private fund, responsible for investment decisions and bearing unlimited liability for the partnership.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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