HWM·Portfolio
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Easy Examples

Fifteen ordinary situations, each shown end to end in rupees. Every figure below is produced by the same calculation engine that runs on live portfolios, at a 20% performance fee.

1. A normal profitable quarter2. The portfolio falls3. The portfolio partly recovers4. The portfolio crosses the High Water Mark5. You add money6. You add money, then the portfolio grows7. A large deposit into a portfolio that is down8. You take money out while below the High Water Mark9. You take money out exactly at the High Water Mark10. You take money out while above the High Water Mark11. You withdraw the entire portfolio after a profit12. A withdrawal, then a recovery13. You add money after a loss14. Several deposits in one quarter15. A deposit, a withdrawal and a profit in the same quarter16. Profit you have not sold yet17. You sell a holding and book the profit18. You reinvest the profit you booked

Example 1: A normal profitable quarter

The portfolio grows. What is the fee?
Fee ₹10,000

Starting situation

You invested ₹3,00,000. Your High Water Mark starts at ₹3,00,000.

What happened

  1. Portfolio value moves to ₹3,50,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,00,000
Starting High Water Mark₹3,00,000
Portfolio value at quarter-end₹3,50,000
Applicable High Water Mark₹3,00,000
Eligible profit+₹50,000
Performance fee at 20%−₹10,000
Final portfolio value₹3,40,000
New High Water Mark₹3,40,000
You made ₹50,000 of new profit, so you pay 20% of it. The rest stays with you, and your High Water Mark moves up so this profit is never charged again.
Show the full calculation
Portfolio value moves to ₹3,50,000
  1. Portfolio value updated: ₹3,00,000.00 -> ₹3,50,000.00 (gain of ₹50,000.00)
  2. High Water Mark is unchanged at ₹3,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,00,000.00
  2. High Water Mark at the start of the period: ₹3,00,000.00
  3. Applicable High Water Mark at period end: ₹3,00,000.00
  4. Portfolio value at the end of the period: ₹3,50,000.00
  5. New performance above the High Water Mark: ₹3,50,000.00 - ₹3,00,000.00 = ₹50,000.00
  6. Performance fee: ₹50,000.00 x 20% = ₹10,000.00
  7. Portfolio value after the fee: ₹3,50,000.00 - ₹10,000.00 = ₹3,40,000.00
  8. Your new High Water Mark is ₹3,40,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 2: The portfolio falls

The market goes down. Do you pay anything?
No performance fee

Starting situation

Your portfolio is ₹3,40,000 and your High Water Mark is ₹3,40,000.

What happened

  1. Portfolio value moves to ₹3,05,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,40,000
Starting High Water Mark₹3,40,000
Portfolio value at quarter-end₹3,05,000
Applicable High Water Mark₹3,40,000
Eligible profit₹0
Performance fee at 20%₹0
Final portfolio value₹3,05,000
New High Water Mark₹3,40,000
No. There is no new profit, so there is no fee. Your High Water Mark stays where it was — it is not reduced just because the portfolio fell.
Why was no fee charged?
Portfolio value moves to ₹3,05,000
  1. Portfolio value updated: ₹3,40,000.00 -> ₹3,05,000.00 (loss of ₹35,000.00)
  2. High Water Mark is unchanged at ₹3,40,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,40,000.00
  2. High Water Mark at the start of the period: ₹3,40,000.00
  3. Applicable High Water Mark at period end: ₹3,40,000.00
  4. Portfolio value at the end of the period: ₹3,05,000.00
  5. The portfolio is ₹35,000.00 below the applicable High Water Mark, so there is no new performance.
  6. Eligible profit: ₹0.00
  7. Performance fee: ₹0.00
  8. Your High Water Mark stays at ₹3,40,000.00. No fee is charged until the portfolio recovers above this level.

Example 3: The portfolio partly recovers

The portfolio recovers, but not all the way back. Any fee?
No performance fee

Starting situation

Your portfolio is ₹3,05,000 and your High Water Mark is ₹3,40,000.

What happened

  1. Portfolio value moves to ₹3,25,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,05,000
Starting High Water Mark₹3,40,000
Portfolio value at quarter-end₹3,25,000
Applicable High Water Mark₹3,40,000
Eligible profit₹0
Performance fee at 20%₹0
Final portfolio value₹3,25,000
New High Water Mark₹3,40,000
Still no fee. Recovering part of a loss is not new profit. You pay nothing until the portfolio climbs back above ₹3,40,000.
Why was no fee charged?
Portfolio value moves to ₹3,25,000
  1. Portfolio value updated: ₹3,05,000.00 -> ₹3,25,000.00 (gain of ₹20,000.00)
  2. High Water Mark is unchanged at ₹3,40,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,05,000.00
  2. High Water Mark at the start of the period: ₹3,40,000.00
  3. Applicable High Water Mark at period end: ₹3,40,000.00
  4. Portfolio value at the end of the period: ₹3,25,000.00
  5. The portfolio is ₹15,000.00 below the applicable High Water Mark, so there is no new performance.
  6. Eligible profit: ₹0.00
  7. Performance fee: ₹0.00
  8. Your High Water Mark stays at ₹3,40,000.00. No fee is charged until the portfolio recovers above this level.

Example 4: The portfolio crosses the High Water Mark

The portfolio finally goes past its old high. What is charged?
Fee ₹4,000

Starting situation

Your portfolio is ₹3,25,000 and your High Water Mark is ₹3,40,000.

What happened

  1. Portfolio value moves to ₹3,60,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,25,000
Starting High Water Mark₹3,40,000
Portfolio value at quarter-end₹3,60,000
Applicable High Water Mark₹3,40,000
Eligible profit+₹20,000
Performance fee at 20%−₹4,000
Final portfolio value₹3,56,000
New High Water Mark₹3,56,000
Only the part above ₹3,40,000 counts. The portfolio rose ₹35,000 but only ₹20,000 of that is above the High Water Mark, so the fee is charged on ₹20,000 — not on ₹35,000.
Show the full calculation
Portfolio value moves to ₹3,60,000
  1. Portfolio value updated: ₹3,25,000.00 -> ₹3,60,000.00 (gain of ₹35,000.00)
  2. High Water Mark is unchanged at ₹3,40,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,25,000.00
  2. High Water Mark at the start of the period: ₹3,40,000.00
  3. Applicable High Water Mark at period end: ₹3,40,000.00
  4. Portfolio value at the end of the period: ₹3,60,000.00
  5. New performance above the High Water Mark: ₹3,60,000.00 - ₹3,40,000.00 = ₹20,000.00
  6. Performance fee: ₹20,000.00 x 20% = ₹4,000.00
  7. Portfolio value after the fee: ₹3,60,000.00 - ₹4,000.00 = ₹3,56,000.00
  8. Your new High Water Mark is ₹3,56,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 5: You add money

You deposit ₹2,00,000. Is that treated as profit?
No performance fee

Starting situation

Your portfolio is ₹3,80,000 and your High Water Mark is ₹4,00,000.

What happened

  1. You deposit ₹2,00,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,80,000
Starting High Water Mark₹4,00,000
Money added₹2,00,000
Portfolio value at quarter-end₹5,80,000
Applicable High Water Mark₹6,00,000
Eligible profit₹0
Performance fee at 20%₹0
Final portfolio value₹5,80,000
New High Water Mark₹6,00,000
No. Your portfolio jumps to ₹5,80,000, but your High Water Mark also rises by exactly ₹2,00,000 to ₹6,00,000. Your own money is never charged a performance fee.
Why was no fee charged?
You deposit ₹2,00,000
  1. Deposit: ₹2,00,000.00
  2. Portfolio value: ₹3,80,000.00 + ₹2,00,000.00 = ₹5,80,000.00
  3. High Water Mark: ₹4,00,000.00 + ₹2,00,000.00 = ₹6,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,80,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Money you added during the period: ₹2,00,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Applicable High Water Mark at period end: ₹6,00,000.00
  5. Portfolio value at the end of the period: ₹5,80,000.00
  6. The portfolio is ₹20,000.00 below the applicable High Water Mark, so there is no new performance.
  7. Eligible profit: ₹0.00
  8. Performance fee: ₹0.00
  9. Your High Water Mark stays at ₹6,00,000.00. No fee is charged until the portfolio recovers above this level.

Example 6: You add money, then the portfolio grows

You deposit ₹2,00,000 and then the portfolio gains. What is charged?
Fee ₹10,000

Starting situation

Your portfolio is ₹3,80,000 and your High Water Mark is ₹4,00,000.

What happened

  1. You deposit ₹2,00,000
  2. Portfolio value moves to ₹6,50,000
  3. The quarter closed and the fee was worked out.
Starting portfolio value₹3,80,000
Starting High Water Mark₹4,00,000
Money added₹2,00,000
Portfolio value at quarter-end₹6,50,000
Applicable High Water Mark₹6,00,000
Eligible profit+₹50,000
Performance fee at 20%−₹10,000
Final portfolio value₹6,40,000
New High Water Mark₹6,40,000
The benchmark became ₹6,00,000 after your deposit. The portfolio ended at ₹6,50,000, so only the ₹50,000 earned above the benchmark is charged.
Show the full calculation
You deposit ₹2,00,000
  1. Deposit: ₹2,00,000.00
  2. Portfolio value: ₹3,80,000.00 + ₹2,00,000.00 = ₹5,80,000.00
  3. High Water Mark: ₹4,00,000.00 + ₹2,00,000.00 = ₹6,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
Portfolio value moves to ₹6,50,000
  1. Portfolio value updated: ₹5,80,000.00 -> ₹6,50,000.00 (gain of ₹70,000.00)
  2. High Water Mark is unchanged at ₹6,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,80,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Money you added during the period: ₹2,00,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Applicable High Water Mark at period end: ₹6,00,000.00
  5. Portfolio value at the end of the period: ₹6,50,000.00
  6. New performance above the High Water Mark: ₹6,50,000.00 - ₹6,00,000.00 = ₹50,000.00
  7. Performance fee: ₹50,000.00 x 20% = ₹10,000.00
  8. Portfolio value after the fee: ₹6,50,000.00 - ₹10,000.00 = ₹6,40,000.00
  9. Your new High Water Mark is ₹6,40,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 7: A large deposit into a portfolio that is down

Your portfolio is down and you add a lot of money. Does the big jump trigger a fee?
No performance fee

Starting situation

Your portfolio is ₹3,50,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You deposit ₹5,00,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,50,000
Starting High Water Mark₹5,00,000
Money added₹5,00,000
Portfolio value at quarter-end₹8,50,000
Applicable High Water Mark₹10,00,000
Eligible profit₹0
Performance fee at 20%₹0
Final portfolio value₹8,50,000
New High Water Mark₹10,00,000
No fee. The portfolio value more than doubles to ₹8,50,000, but the benchmark rises to ₹10,00,000. Adding money can never create a performance fee by itself.
Why was no fee charged?
You deposit ₹5,00,000
  1. Deposit: ₹5,00,000.00
  2. Portfolio value: ₹3,50,000.00 + ₹5,00,000.00 = ₹8,50,000.00
  3. High Water Mark: ₹5,00,000.00 + ₹5,00,000.00 = ₹10,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,50,000.00
  2. High Water Mark at the start of the period: ₹5,00,000.00
  3. Money you added during the period: ₹5,00,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Applicable High Water Mark at period end: ₹10,00,000.00
  5. Portfolio value at the end of the period: ₹8,50,000.00
  6. The portfolio is ₹1,50,000.00 below the applicable High Water Mark, so there is no new performance.
  7. Eligible profit: ₹0.00
  8. Performance fee: ₹0.00
  9. Your High Water Mark stays at ₹10,00,000.00. No fee is charged until the portfolio recovers above this level.

Example 8: You take money out while below the High Water Mark

You withdraw ₹1,00,000 while the portfolio is below its high. Any fee?
No performance fee

Starting situation

Your portfolio is ₹4,50,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You withdraw ₹1,00,000
Starting portfolio value₹4,50,000
Starting High Water Mark₹5,00,000
Money taken out₹1,00,000
Portfolio value after₹3,50,000
Applicable High Water Mark₹4,00,000
Eligible profit₹0
Performance fee at 20%₹0
Cash paid out to you₹1,00,000
Final portfolio value₹3,50,000
New High Water Mark₹4,00,000
No fee — there was no new profit to charge. Your High Water Mark drops by the same ₹1,00,000 you took out, so the ₹50,000 you still need to recover stays exactly the same.
Why was no fee charged?
You withdraw ₹1,00,000
  1. Portfolio value before withdrawal: ₹4,50,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹50,000.00 below the High Water Mark, so there is no new performance to charge for.
  4. Withdrawal: ₹1,00,000.00
  5. Performance fee on this withdrawal: ₹0.00
  6. Portfolio value after withdrawal: ₹3,50,000.00
  7. High Water Mark after withdrawal: ₹4,00,000.00 (reduced by the same ₹1,00,000.00 that was withdrawn, so the amount still to be recovered is unchanged).

Example 9: You take money out exactly at the High Water Mark

The portfolio is exactly at its high and you withdraw ₹1,00,000.
No performance fee

Starting situation

Your portfolio is ₹5,00,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You withdraw ₹1,00,000
Starting portfolio value₹5,00,000
Starting High Water Mark₹5,00,000
Money taken out₹1,00,000
Portfolio value after₹4,00,000
Applicable High Water Mark₹4,00,000
Eligible profit₹0
Performance fee at 20%₹0
Cash paid out to you₹1,00,000
Final portfolio value₹4,00,000
New High Water Mark₹4,00,000
No fee. There is no profit above the High Water Mark, so nothing is charged. Both your portfolio and your High Water Mark fall by ₹1,00,000.
Why was no fee charged?
You withdraw ₹1,00,000
  1. Portfolio value before withdrawal: ₹5,00,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹0.00 below the High Water Mark, so there is no new performance to charge for.
  4. Withdrawal: ₹1,00,000.00
  5. Performance fee on this withdrawal: ₹0.00
  6. Portfolio value after withdrawal: ₹4,00,000.00
  7. High Water Mark after withdrawal: ₹4,00,000.00 (reduced by the same ₹1,00,000.00 that was withdrawn, so the amount still to be recovered is unchanged).

Example 10: You take money out while above the High Water Mark

The portfolio is in profit and you withdraw before quarter-end. What happens?
Fee ₹10,000

Starting situation

Your portfolio is ₹6,00,000 and your High Water Mark is ₹5,00,000, so ₹1,00,000 of profit has not been charged yet.

What happened

  1. You withdraw ₹3,00,000
Starting portfolio value₹6,00,000
Starting High Water Mark₹5,00,000
Money taken out₹3,00,000
Portfolio value after₹3,00,000
Applicable High Water Mark₹2,50,000
Eligible profit+₹50,000
Performance fee at 20%−₹10,000
Cash paid out to you₹2,90,000
Final portfolio value₹3,00,000
New High Water Mark₹2,50,000
You are taking out half the portfolio, so half the uncharged profit (₹50,000) is settled now and the fee on it is ₹10,000. You receive ₹2,90,000. The other ₹50,000 of profit stays invested and is charged only at quarter-end.
Show the full calculation
You withdraw ₹3,00,000
  1. Portfolio value before withdrawal: ₹6,00,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹1,00,000.00 above the High Water Mark, so this much new performance has not been charged for yet.
  4. Withdrawal: ₹3,00,000.00, which is 50% of the portfolio.
  5. Performance being taken out: ₹1,00,000.00 x 50% = ₹50,000.00
  6. Performance fee: ₹50,000.00 x 20% = ₹10,000.00
  7. Amount paid out to you: ₹3,00,000.00 - ₹10,000.00 = ₹2,90,000.00
  8. Portfolio value after withdrawal: ₹3,00,000.00
  9. High Water Mark after withdrawal: ₹2,50,000.00. The remaining ₹50,000.00 of performance you still hold has not been charged for, and will be assessed at quarter end.

Example 11: You withdraw the entire portfolio after a profit

You close the account while in profit. Can the fee be avoided?
Fee ₹20,000

Starting situation

Your portfolio is ₹6,00,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You withdraw ₹6,00,000
Starting portfolio value₹6,00,000
Starting High Water Mark₹5,00,000
Money taken out₹6,00,000
Portfolio value after₹0
Applicable High Water Mark₹0
Eligible profit+₹1,00,000
Performance fee at 20%−₹20,000
Cash paid out to you₹5,80,000
Final portfolio value₹0
New High Water Mark₹0
No. Taking everything out settles all ₹1,00,000 of uncharged profit, so the fee is ₹20,000 and you receive ₹5,80,000 — exactly what you would have received had the quarter closed first.
Show the full calculation
You withdraw ₹6,00,000
  1. Portfolio value before withdrawal: ₹6,00,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹1,00,000.00 above the High Water Mark, so this much new performance has not been charged for yet.
  4. Withdrawal: ₹6,00,000.00, which is 100% of the portfolio.
  5. Performance being taken out: ₹1,00,000.00 x 100% = ₹1,00,000.00
  6. Performance fee: ₹1,00,000.00 x 20% = ₹20,000.00
  7. Amount paid out to you: ₹6,00,000.00 - ₹20,000.00 = ₹5,80,000.00
  8. Portfolio value after withdrawal: ₹0.00
  9. The portfolio has been fully withdrawn, so the High Water Mark is closed at ₹0.00.

Example 12: A withdrawal, then a recovery

After withdrawing below your high, the portfolio recovers. What is charged?
Fee ₹6,000

Starting situation

Your portfolio is ₹4,50,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You withdraw ₹1,00,000
  2. Portfolio value moves to ₹4,30,000
  3. The quarter closed and the fee was worked out.
Starting portfolio value₹4,50,000
Starting High Water Mark₹5,00,000
Money taken out₹1,00,000
Portfolio value at quarter-end₹4,30,000
Applicable High Water Mark₹4,00,000
Eligible profit+₹30,000
Performance fee at 20%−₹6,000
Cash paid out to you₹1,00,000
Final portfolio value₹4,24,000
New High Water Mark₹4,24,000
After the withdrawal your benchmark is ₹4,00,000. The portfolio recovered to ₹4,30,000, so ₹30,000 is new profit and the fee is ₹6,000.
Show the full calculation
You withdraw ₹1,00,000
  1. Portfolio value before withdrawal: ₹4,50,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹50,000.00 below the High Water Mark, so there is no new performance to charge for.
  4. Withdrawal: ₹1,00,000.00
  5. Performance fee on this withdrawal: ₹0.00
  6. Portfolio value after withdrawal: ₹3,50,000.00
  7. High Water Mark after withdrawal: ₹4,00,000.00 (reduced by the same ₹1,00,000.00 that was withdrawn, so the amount still to be recovered is unchanged).
Portfolio value moves to ₹4,30,000
  1. Portfolio value updated: ₹3,50,000.00 -> ₹4,30,000.00 (gain of ₹80,000.00)
  2. High Water Mark is unchanged at ₹4,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,50,000.00
  2. High Water Mark at the start of the period: ₹5,00,000.00
  3. Money you took out during the period: ₹1,00,000.00. Your High Water Mark was adjusted for this, so withdrawals are never counted as losses.
  4. Applicable High Water Mark at period end: ₹4,00,000.00
  5. Portfolio value at the end of the period: ₹4,30,000.00
  6. New performance above the High Water Mark: ₹4,30,000.00 - ₹4,00,000.00 = ₹30,000.00
  7. Performance fee: ₹30,000.00 x 20% = ₹6,000.00
  8. Portfolio value after the fee: ₹4,30,000.00 - ₹6,000.00 = ₹4,24,000.00
  9. Your new High Water Mark is ₹4,24,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 13: You add money after a loss

Your portfolio is down and you add money. Does the deposit erase the loss?
No performance fee

Starting situation

Your portfolio is ₹3,20,000 and your High Water Mark is ₹4,00,000.

What happened

  1. You deposit ₹1,00,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹3,20,000
Starting High Water Mark₹4,00,000
Money added₹1,00,000
Portfolio value at quarter-end₹4,20,000
Applicable High Water Mark₹5,00,000
Eligible profit₹0
Performance fee at 20%₹0
Final portfolio value₹4,20,000
New High Water Mark₹5,00,000
No. Your portfolio becomes ₹4,20,000 — above the old ₹4,00,000 mark — but the benchmark also rose to ₹5,00,000. The ₹80,000 loss still has to be recovered before any fee applies.
Why was no fee charged?
You deposit ₹1,00,000
  1. Deposit: ₹1,00,000.00
  2. Portfolio value: ₹3,20,000.00 + ₹1,00,000.00 = ₹4,20,000.00
  3. High Water Mark: ₹4,00,000.00 + ₹1,00,000.00 = ₹5,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
At quarter-end
  1. Portfolio value at the start of the period: ₹3,20,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Money you added during the period: ₹1,00,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Applicable High Water Mark at period end: ₹5,00,000.00
  5. Portfolio value at the end of the period: ₹4,20,000.00
  6. The portfolio is ₹80,000.00 below the applicable High Water Mark, so there is no new performance.
  7. Eligible profit: ₹0.00
  8. Performance fee: ₹0.00
  9. Your High Water Mark stays at ₹5,00,000.00. No fee is charged until the portfolio recovers above this level.

Example 14: Several deposits in one quarter

You deposit twice during a quarter and then the portfolio grows.
Fee ₹10,000

Starting situation

Your portfolio is ₹4,50,000 and your High Water Mark is ₹5,00,000.

What happened

  1. You deposit ₹1,00,000
  2. You deposit ₹50,000
  3. Portfolio value moves to ₹7,00,000
  4. The quarter closed and the fee was worked out.
Starting portfolio value₹4,50,000
Starting High Water Mark₹5,00,000
Money added₹1,50,000
Portfolio value at quarter-end₹7,00,000
Applicable High Water Mark₹6,50,000
Eligible profit+₹50,000
Performance fee at 20%−₹10,000
Final portfolio value₹6,90,000
New High Water Mark₹6,90,000
Each deposit raises the benchmark by its own amount, so the benchmark becomes ₹6,50,000. Of the ₹7,00,000 closing value, only ₹50,000 is new profit.
Show the full calculation
You deposit ₹1,00,000
  1. Deposit: ₹1,00,000.00
  2. Portfolio value: ₹4,50,000.00 + ₹1,00,000.00 = ₹5,50,000.00
  3. High Water Mark: ₹5,00,000.00 + ₹1,00,000.00 = ₹6,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
You deposit ₹50,000
  1. Deposit: ₹50,000.00
  2. Portfolio value: ₹5,50,000.00 + ₹50,000.00 = ₹6,00,000.00
  3. High Water Mark: ₹6,00,000.00 + ₹50,000.00 = ₹6,50,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
Portfolio value moves to ₹7,00,000
  1. Portfolio value updated: ₹6,00,000.00 -> ₹7,00,000.00 (gain of ₹1,00,000.00)
  2. High Water Mark is unchanged at ₹6,50,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,50,000.00
  2. High Water Mark at the start of the period: ₹5,00,000.00
  3. Money you added during the period: ₹1,50,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Applicable High Water Mark at period end: ₹6,50,000.00
  5. Portfolio value at the end of the period: ₹7,00,000.00
  6. New performance above the High Water Mark: ₹7,00,000.00 - ₹6,50,000.00 = ₹50,000.00
  7. Performance fee: ₹50,000.00 x 20% = ₹10,000.00
  8. Portfolio value after the fee: ₹7,00,000.00 - ₹10,000.00 = ₹6,90,000.00
  9. Your new High Water Mark is ₹6,90,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 15: A deposit, a withdrawal and a profit in the same quarter

Everything happens at once. How is the fee worked out?
Fee ₹10,000

Starting situation

Your portfolio is ₹4,00,000 and your High Water Mark is ₹4,00,000.

What happened

  1. You deposit ₹1,00,000
  2. Portfolio value moves to ₹4,80,000
  3. You withdraw ₹50,000
  4. Portfolio value moves to ₹5,00,000
  5. The quarter closed and the fee was worked out.
Starting portfolio value₹4,00,000
Starting High Water Mark₹4,00,000
Money added₹1,00,000
Money taken out₹50,000
Portfolio value at quarter-end₹5,00,000
Applicable High Water Mark₹4,50,000
Eligible profit+₹50,000
Performance fee at 20%−₹10,000
Cash paid out to you₹50,000
Final portfolio value₹4,90,000
New High Water Mark₹4,90,000
Each event is handled on its own terms: the deposit raised the benchmark to ₹5,00,000, the withdrawal (taken while below the benchmark) lowered it to ₹4,50,000, and only the ₹50,000 finally earned above that benchmark is charged.
Show the full calculation
You deposit ₹1,00,000
  1. Deposit: ₹1,00,000.00
  2. Portfolio value: ₹4,00,000.00 + ₹1,00,000.00 = ₹5,00,000.00
  3. High Water Mark: ₹4,00,000.00 + ₹1,00,000.00 = ₹5,00,000.00
  4. Your deposit is raised on both sides, so the money you added is not treated as profit and generates no fee.
Portfolio value moves to ₹4,80,000
  1. Portfolio value updated: ₹5,00,000.00 -> ₹4,80,000.00 (loss of ₹20,000.00)
  2. High Water Mark is unchanged at ₹5,00,000.00. It only changes when a fee is charged or when you add or remove money.
You withdraw ₹50,000
  1. Portfolio value before withdrawal: ₹4,80,000.00
  2. High Water Mark before withdrawal: ₹5,00,000.00
  3. The portfolio is ₹20,000.00 below the High Water Mark, so there is no new performance to charge for.
  4. Withdrawal: ₹50,000.00
  5. Performance fee on this withdrawal: ₹0.00
  6. Portfolio value after withdrawal: ₹4,30,000.00
  7. High Water Mark after withdrawal: ₹4,50,000.00 (reduced by the same ₹50,000.00 that was withdrawn, so the amount still to be recovered is unchanged).
Portfolio value moves to ₹5,00,000
  1. Portfolio value updated: ₹4,30,000.00 -> ₹5,00,000.00 (gain of ₹70,000.00)
  2. High Water Mark is unchanged at ₹4,50,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,00,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Money you added during the period: ₹1,00,000.00. Your High Water Mark was raised by the same amount, so deposits are never counted as profit.
  4. Money you took out during the period: ₹50,000.00. Your High Water Mark was adjusted for this, so withdrawals are never counted as losses.
  5. Applicable High Water Mark at period end: ₹4,50,000.00
  6. Portfolio value at the end of the period: ₹5,00,000.00
  7. New performance above the High Water Mark: ₹5,00,000.00 - ₹4,50,000.00 = ₹50,000.00
  8. Performance fee: ₹50,000.00 x 20% = ₹10,000.00
  9. Portfolio value after the fee: ₹5,00,000.00 - ₹10,000.00 = ₹4,90,000.00
  10. Your new High Water Mark is ₹4,90,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 16: Profit you have not sold yet

Your shares are up but you have not sold anything. Is there a fee?
Fee ₹12,000

Starting situation

Your portfolio is ₹4,00,000, all of it in shares, and your High Water Mark is ₹4,00,000.

What happened

  1. Portfolio value moves to ₹4,60,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹4,00,000
Starting High Water Mark₹4,00,000
Portfolio value at quarter-end₹4,60,000
Applicable High Water Mark₹4,00,000
Eligible profit+₹60,000
Performance fee at 20%−₹12,000
Final portfolio value₹4,48,000
New High Water Mark₹4,48,000
Yes. Your portfolio value is your cash plus the market value of what you hold, so a gain counts as soon as the market shows it — you do not have to sell for it to be real. The whole ₹60,000 here is profit on paper, and the fee is ₹12,000.
Show the full calculation
Portfolio value moves to ₹4,60,000
  1. Portfolio value updated: ₹4,00,000.00 -> ₹4,60,000.00 (gain of ₹60,000.00)
  2. High Water Mark is unchanged at ₹4,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,00,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Applicable High Water Mark at period end: ₹4,00,000.00
  4. Portfolio value at the end of the period: ₹4,60,000.00
  5. New performance above the High Water Mark: ₹4,60,000.00 - ₹4,00,000.00 = ₹60,000.00
  6. Performance fee: ₹60,000.00 x 20% = ₹12,000.00
  7. Portfolio value after the fee: ₹4,60,000.00 - ₹12,000.00 = ₹4,48,000.00
  8. Your new High Water Mark is ₹4,48,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 17: You sell a holding and book the profit

You sell shares at a gain. Does booking it trigger a fee?
Fee ₹12,000

Starting situation

Your portfolio is ₹4,60,000 — ₹0 cash and ₹4,60,000 of shares — and your High Water Mark is ₹4,00,000.

What happened

  1. Sold ₹1,60,000 of shares; cash ₹1,60,000, shares ₹3,00,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹4,60,000
Starting High Water Mark₹4,00,000
Portfolio value at quarter-end₹4,60,000
Applicable High Water Mark₹4,00,000
Eligible profit+₹60,000
Performance fee at 20%−₹12,000
Final portfolio value₹4,48,000
New High Water Mark₹4,48,000
No. Selling swaps shares for cash of the same value, so your portfolio is still worth ₹4,60,000 and nothing about the fee changes. The ₹12,000 charged at quarter-end is the same whether you sold or not — it was already counted when the market moved.
Show the full calculation
Sold ₹1,60,000 of shares; cash ₹1,60,000, shares ₹3,00,000
  1. Portfolio value unchanged at ₹4,60,000.00. Buying or selling inside the portfolio moves money between cash and holdings without changing what the portfolio is worth.
  2. High Water Mark is unchanged at ₹4,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,60,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Applicable High Water Mark at period end: ₹4,00,000.00
  4. Portfolio value at the end of the period: ₹4,60,000.00
  5. New performance above the High Water Mark: ₹4,60,000.00 - ₹4,00,000.00 = ₹60,000.00
  6. Performance fee: ₹60,000.00 x 20% = ₹12,000.00
  7. Portfolio value after the fee: ₹4,60,000.00 - ₹12,000.00 = ₹4,48,000.00
  8. Your new High Water Mark is ₹4,48,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.

Example 18: You reinvest the profit you booked

You buy new shares with the cash you just realised. Is that a deposit?
Fee ₹12,000

Starting situation

Your portfolio is ₹4,60,000 — ₹1,60,000 cash and ₹3,00,000 of shares — and your High Water Mark is ₹4,00,000.

What happened

  1. Bought ₹1,50,000 of shares; cash ₹10,000, shares ₹4,50,000
  2. The quarter closed and the fee was worked out.
Starting portfolio value₹4,60,000
Starting High Water Mark₹4,00,000
Portfolio value at quarter-end₹4,60,000
Applicable High Water Mark₹4,00,000
Eligible profit+₹60,000
Performance fee at 20%−₹12,000
Final portfolio value₹4,48,000
New High Water Mark₹4,48,000
No. Putting realised profit back to work moves money from cash into shares inside the same portfolio. Your value does not change, so it is not a deposit and your High Water Mark is not raised by it. Only money you actually add from outside does that.
Show the full calculation
Bought ₹1,50,000 of shares; cash ₹10,000, shares ₹4,50,000
  1. Portfolio value unchanged at ₹4,60,000.00. Buying or selling inside the portfolio moves money between cash and holdings without changing what the portfolio is worth.
  2. High Water Mark is unchanged at ₹4,00,000.00. It only changes when a fee is charged or when you add or remove money.
At quarter-end
  1. Portfolio value at the start of the period: ₹4,60,000.00
  2. High Water Mark at the start of the period: ₹4,00,000.00
  3. Applicable High Water Mark at period end: ₹4,00,000.00
  4. Portfolio value at the end of the period: ₹4,60,000.00
  5. New performance above the High Water Mark: ₹4,60,000.00 - ₹4,00,000.00 = ₹60,000.00
  6. Performance fee: ₹60,000.00 x 20% = ₹12,000.00
  7. Portfolio value after the fee: ₹4,60,000.00 - ₹12,000.00 = ₹4,48,000.00
  8. Your new High Water Mark is ₹4,48,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.