'High Water Mark' is the higher of either 'corpus investment value' or 'highest NAV at which fees has been paid historically'. Illustration of how the High-Water Mark would work: A client's initial contribution is Rs 1,00,00,000 which then rises to Rs 1,25,00,000 in its first year. Therefore, a performance fee would be payable on the Rs 25,00,000 return. Next year, the portfolio value drops to Rs 110,00,000. Therefore, no performance fee is payable. In the third year, the portfolio value rises to Rs 1,40,00,000. Performance fee is payable only on the profit which is in excess of the previously achieved high watermark ie of Rs 1,25,00,000 less performance fee (including taxes).