#9TDAYVC-DAY-16 🎯What is High Watermark in VC? 🎯What are Distributions/Waterfall? Apart from hurdle rate, Some consider also “high watermark” This is more common practice in hedge funds. This market denotes the highest value recorded by the fund Corpous in the past.If this level is prescribed, Then the fund manager will get additional Returns only after it crossed that value or mark. Then the additional returns will be as follows: In first year, If the fund value is upto 120 Crore then returns will be nil as it is equal to hurdle rate. If the fund value exceeds let’s say 145 crores then the additional return is 25 Crores. In a fund, This pays annual incentives to the fund managers. Distributions:This Indicates how the proceeds of the Funds will be returned to the Investors. This includes proportion, Priority, Management Fees & additional returns etc. Therefore it is very much Essential to understand the distribution terms of the fund carefully from the PPM before investing.
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