Can someone explain the highlighted part in solution? Why is hurdle rate applied on top of high water mark? Generally it is done only on the initial investment to find out eligibility of incentive fee..
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Because if we apply on the beginning value directly, it means that we are paying the incentive fees twice indirectly because the initial value is less than hign water mark that means the value decreased from this top before, so why will we pay the incentive fee to again reach that mark. We will only pay the incentive for beyond the mark