Reframing High-Water Logic: From NAV Drift to Daily Threshold Mastery
Most fund managers misinterpret the relationship between NAV and the high-water mark (HWM) by anchoring to long-term drawdown gaps. They often:
Use current NAV as a vague proxy for “distance to recovery”
Assume that crossing the HWM is a binary event, dependent on full-cycle market recovery
Rationalize potential closure based on NAV stagnation rather than path-dependent performance behavior
But this mindset bifurcates the psychological and structural alignment between actual recovery behavior and the mechanics of surpassing the HWM.
The Smarter Framework:
Daily 80% Thresholds > NAV Fixation
Is a practical, high-frequency performance structure that reorients toward:
Daily success rate targeting (e.g., 80% of max single-day return)
Rolling compounding effect that builds pressure upward
Watermark recovery as a function of process, not hope
This structure is superior because:
It creates a path back to the HWM rather than staring at a static number.
It incentivizes precision, control, and daily edge harvesting, not passive waiting.
It reconnects process with potential—closing the gap between performance mechanics and long-term upside.
“Don’t chase NAV. Target structure.”
A fund that targets hitting 80% of its best single-day return consistently is compounding probabilistic pressure in a way that naturally collapses the distance to the HWM—without relying on market cycles or valuation multiples to cooperate.
This is not only more rational—it’s more controllable. And in fund structuring, control conviction.