Let's take an example to better understand. For the months of January(0), February(1), March(2) and April(3), the valuations are 100, 130, 125, 143. In this example, the high water mark recorded at the end of March is 125 (the last highest valuation, made at the end of February). The performance in March is negative by 4% (from 130 to 125) and Diabolo receives no commission. The following month, the performance is positive by 14.4% (from 125 to 143) and Diabolo receives a commission. But since the high water mark is 130, the performance fee will only be calculated on the increase from 130 to 143, i.e. 10%.