HWM treatment for DarwinIA allocations includes a reset
In order to maximize the performance fees to be received from DarwinIA assignments, the treatment of the HWM for DarwinIA allocations works in a different way. If your current allocations expire with losses, to avoid having to recover from those losses to exceed your HWM, this loss would be filled, so that any future assignments would start at the same level as your last watermark.
This way, you don't have to worry about your HWM in case you receive allocations again, as any profit made on future allocations will guarantee you performance fees. Please note that all your current allocations have to expire for this reset to occur, i.e. it will not take place as long as there are active allocations.
This article refers specifically to DarwinIA allocations treatment. For investors allocation please visit this article.
Example
Let's suppose there are 3 non-simultaneous allocations: 1 allocation from month 0 to month 3, another allocation from month 3 to month 6, and a third from month 6 to month 9.
For DarwinIA allocations, the HWM would have been reset at the end of the second quarter: the €7,000 of losses would be added as HWM reset, so that for the third allocation, your accumulated profits with the DarwinIA capital at the initial moment of receiving the allocation would be €10,000 (the equivalent of your last HWM). Thus, unlike what would happen with an investor, with a profit of 8,000€ in the last quarter, you would receiveperformance fees for those 8,000€. In the case of an investor, as you can see in the explanation at the beginning of the article, you would have been paid for the difference between HWM2 (€11,000) and HWM1 (€10,000), i.e. €1,000 of additional profit and €150 of performance fees.
2. The time period (a quarter)
Performance fees are charged per DARWIN on a quarterly basis, i.e. every three months. The quarter starts when the first allocation has been received in the DARWIN. Successive allocations have no effect on the starting date of the quarter, as this is set uniquely based on the first allocation date.
Each time the quarter ends, if the previous high-water mark has been surpassed, 15% of the net profit (closed profit + open profit) generated in the quarter will be paid to the trader.
Performance Fee & Investor Behaviour section