Starting conditions
An illustrative fund has two investors: 6,000 and 4,000 units of one currency. Starting High Water Marks equal their starting capital. There are no deposits or withdrawals during the example period. The assumed profit before fees is 1,000 and the agreed example fee is 20% of each investor’s new profit.
Implementation workflow
Use one broker and one currency for the fund. Stop trading and confirm there are no open positions or pending orders before settlement. Reconcile account evidence with the investor ledger.
Allocate the assumed 1,000 profit by the unchanged 60% and 40% shares: 600 and 400. With no earlier unrecovered High Water Mark, example fees are 120 and 80. This is a calculation assumption, not a forecast or a quoted standard fee.
Investor balances after fees are 6,480 and 4,320. Their sum is 10,800; adding the 200 fee reconciles to 11,000 before fees. Settlement, fee records and any transfers require their own confirmation and reconciliation.
| Investor | Starting capital | Profit before fee | Fee (20%) | Closing balance |
|---|---|---|---|---|
| Investor A | 6,000 | 600 | 120 | 6,480 |
| Investor B | 4,000 | 400 | 80 | 4,320 |
| Total | 10,000 | 1,000 | 200 | 10,800 |
Acceptance checks
- Investor balances plus recorded fees reconcile to the period’s 11,000 before-fee value.
- A loss or an unrecovered earlier High Water Mark changes the fee calculation; the simple example must not be reused unchanged.
- New funding or withdrawal requests require the actual settlement rules and updated share records.