High Water Mark

As Arnaud Gabaury is new to the risk manager post, Diabolo wants to professionalise its asset management and risk control. Various tools are being developed, and we can now announce the use of the high-water mark concept.

This technique, which has long been applied in hedge funds, aims to prevent the manager from receiving a return if the performance does not exceed the highest net asset value already received.

How will Diabolo concretely implement this threshold?

It is calculated monthly and corresponds to the highest performance recorded in the previous months.

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%.

This example shows that the use of the high water mark concept guarantees our clients a much fairer performance fee. It is no longer sufficient for a month to be positive to trigger the payment of a commission, but it is now necessary for the follower's account valuation to be at an all-time high.

This new approach shows our commitment to offering our clients a transparent and fair management system.