How do I set up a High Watermark & Offset Losses

Pamela, I'm not totally sure what your question is. But in the case of my fund (Brandywine Symphony Fund), we are paid a profit allocation (incentive fee) at the end of each quarter based on the net performance of each investor's account. The net reduces performance for commissions, management fees, etc. If there is a loss, that is carried forward until profits are earned that exceed the "carryforward" loss, then we receive a profit allocation on the "net new profits" in excess of the carryforward loss. Let me know if you'd like more detail.

Thank you for your answer. Yes, more detail would be very much appreciated.


Jones Qtr Ending Ending Balance Employee/Employer Contributions and/or Deposits Advisory Fees Trading Fees/Commissions Custodial/Other Fees Broker Interest Withholding Tax Loan Disbursement or Client Withdrawal or Transfer Out Loan Repayments Adjusted HWM and/or Ending Balance
Interactive Brokers Jun-10 $406,122.26 $1.29 $0.00 $933.02 $11.25 $234.95 $406,122.26
IRA Dir R/O Sep-10 $561,943.74 $172,720.03 $586.25 $4,861.08 $573,394.96
Dec-10 $445,189.24 $0.00 $0.00 $1,030.93 $572,364.03
Mar-11 $451,471.65 $0.00 $0.00 $780.76 $12.47 $13.27 $571,557.53
Jun-11 $410,044.65 $0.00 $1,578.10 $484.34 $31,795.00 $537,700.09
Sep-11 $286,636.71 $0.00 $0.00 $318.13 $7.50 $537,374.46
Dec-11 $276,370.84 $0.00 $2,655.85 $178.91 $7.50 $40,000.00 $494,532.20
Mar-12 $336,254.39 $0.00 $7,433.53 $298.51 $7.50 $486,792.66

Fidelity Dec-10 $258,393.98 $22,000.00 $0.00 $258,393.98
403(b) Mar-11 $273,952.53 $6,308.17 $0.00 $264,702.15
Jun-11 $279,322.81 $6,445.00 $0.00 $271,147.15
Sep-11 $275,959.52 $8,969.50 $0.00 $280,116.65
Dec-11 $285,286.42 $277.33 $0.00 $280,393.98
Mar-12 $302,874.28 $8,389.07 $0.00 $288,783.05

Interactive Brokers Sep-10 $578,700.88 $0.00 $0.00 $729.92 $7,941.82 $0.00 $0.00 $0.00 $578,700.88
IRA Dir R/O Dec-10 $445,636.08 $0.00 $0.00 $963.88 $0.00 $0.00 $0.00 $0.00 $577,737.00
Mar-11 $445,857.86 $0.00 $0.00 $789.85 $12.41 $0.00 $13.11 $0.00 $576,921.63
Jun-11 $438,542.02 $0.00 $0.00 $489.41 $62.95 $0.00 $0.00 $0.00 $576,369.27
Sep-11 $327,055.15 $0.00 $0.00 $380.73 $7.50 $0.00 $0.00 $0.00 $575,981.04
Dec-11 $341,408.58 $0.00 $2,712.18 $224.05 $7.50 $0.00 $0.00 $0.00 $573,037.31
Mar-12 $375,228.80 $0.00 $3,588.36 $286.72 $7.50 $0.00 $0.00 $0.00 $569,154.73

I apologize for the last reply I sent. I tried to paste in information from my spreadsheet I use. Yes, I would appreciate more detail if you don't mind.

This is my first time using Ask Me and I think I figured out how to attach spreadsheet I am using. These are dummy accounts. The figures in yellow highlight are beginning HWM. Let me know if you're able to open excel file.

Attached Files

1AskMeHelpDeskSampleHWM.xls (29.0 KB, 54 views)

Generally, You take an incentive fee on Net New Trading profits only. So if an account has no trading, no P(L) and no fees for a quarter, but the client reduces the account by 40k, the HWM would be reduced by 40k as well. With our funds we are also required to make up advisory, custodial or other fees. In your spreadsheet I see you reducing the HWM for those. Maybe some people do that but we don't. You would also reduce the HWM for Column E if that is where you put the prior quarter's incentive fee (you do not need to "earn back" your fee). So my formula in cell L23 would look more like: SUM(L22+D23-E23-I23-J23+K23).

Thank you very much, Mike. I appreciate your help. Well, I just want to make sure we are doing right by our clients so one last question. Do you have any suggestions of websites or anyone where I could get an Excel spreadsheet with the formula I need?
Thx
Pamela