In principle, profit sharing is calculated on the basis of an important principle: namely that a so-called "high-watermark" is the reference point. The high-water mark is then a reference to the highest value that our own trading account has reached historically, and the company only takes a share of the profit if the value moves up above this level. That is, if it goes minus for a while and then plus again, the company does not take a share of the profit until the value has again gone above the previous high water mark.

This ensures that the fee is calculated fairly for us customers even in the event that the value of our trading account bounces up and down over a period of time.

A more comprehensive explanation is given below in English, and there is also plenty of additional information on the high water mark concept on the internet.

Initially, profit sharing will be calculated and withdrawn after each trade is closed. We do not yet know exactly how the high water mark will be adjusted in relation to deposits and withdrawals to the account. We will see and learn more details about this directly from MW later.


What Is a High-Water Mark? 

A high-water mark is the highest peak in value that an investment fund or account has reached. This term is often used in the context of fund manager compensation, which is performance-based. The high-water mark ensures the manager does not get paid large sums for poor performance. 

If the manager loses money over a period, he must get the fund above the high-water mark before receiving a performance bonus from the assets under management(AUM)


 - A high-water mark is the highest level in value an investment account or fund has reached.

 - A high-water mark is often used as a demarcation point in determining performance fees that an investor must pay.

 - The purpose is to protect investors from paying a fee for poor performance, and from paying a fee repeatedly every time the fund earns a profit.

 - With a high-water mark, the investor pays a fee that only covers the amount the fund earned between the point of entry and its highest level.

Understanding High-Water Mark 

A high-water mark ensures that investors do not have to pay performance fees for poor performance, but, more importantly, guarantees that investors do not pay performance-based fees twice for the same amount of performance.

High-Water Mark Example 

For example, assume an investor is invested in a hedge fund that charges a 20% performance fee. Assume the investor places $500,000 into the fund, and, during its first month, the fund earns a 15% return. Thus, the investor's original investment is worth $575,000. The investor owes a 20% fee on this $75,000 gain, which equates to $15,000.

At this point, the high-water mark for this particular investor is $575,000, and the investor is obligated to pay $15,000 to the portfolio manager.

Next, assume the fund loses 20% in the next month. The investor's account drops to a value of $460,000. This is where the importance of the high-water mark is noted. A performance fee does not have to be paid on any gains from $460,000 to $575,000, only after the high-water mark amount. Assume that in the third month the fund unexpectedly earns a profit of 50%. In this unlikely case, the value of the investor's account rises from $460,000 to $690,000. Without a high-water mark in place, the investor owes the original $15,000 fee, plus 20% on the gain from $460,000 to $690,000, which equates to 20% on a gain of $230,000, or an additional $46,000 in performance fees.

Value of a High-Water Mark 

The high-water mark prevents this "double fee" from occurring. With a high-water mark in place, all gains from $460,000 to $575,000 are disregarded, but gains above the high-water mark are subject to the performance-based fee. In this example, beyond the original $15,000 performance-based fee, this investor owes 20% on the gains from $575,000 to $690,000, which is an additional $23,000.

In total, with a high-water mark in place, the investor owes $38,000 in performance fees, which is $690,000 less the original investment of $500,000 multiplied by 20%. Without a high-water mark in place, which is below industry standards, the investor owes a 20% performance fee on all gains, which equates to $61,000. The value of a high-water mark is unquestionable.