High Watermark Adjustment after Client Partial Withdraw?

newwurldmn · Mar 28, 2012

Quote from Scataphagos:

I don't think there is an industry norm. CPOs can set parameters for when funds can be withdrawn... and sometimes limit new investments to the beginning of the year only when assets are pooled.

Of course you can keep all records for each account separately and each will have its own high water mark... but you'll likely be swamped with paperwork.

Let's say you have 100 customers. Do you really want to enter 100 separate trades so that each customer gets a specific fill? Along with that, you have to figure a way to juggle the priority of "who gets filled first/last" on each trade so that the entire group of your customers is treated as equally and fairly as possible. Same is true if you make a "block" trade for all customers when the fill is at more than one price. You have to allocate the best fills so that the group is treated as fairly and equally as possible.... that would drive you nuts. The Regulators WILL hold you to this.

I suggest making things administratively easy on yourself... pool assets and account for customer interests in your pool by units... then you don't have to keep account for allocating split price fills.
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I do that now with some SMA's. It's a pain in the ass.

I'll ask some of my hedgefund friends how their funds handle new accounts in the midst of a drawdown. When I get a sufficient answer, I will let you know.

heech · Mar 30, 2012

Of course every investors high water mark is calculated separately. This is so obviously common sense.

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High Watermark Adjustment after Client Partial Withdraw?

newwurldmn

heech

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