单选题

High-water marks are typically used when calculating the incentive fee on hedge funds. They are most likely used by clients to:

A、 avoid prime brokerage fees.
B、 claw back the management fees.
C、 prevent paying twice for the same performance.

【正确答案】 C

【答案解析】

C is correct because high-water marks prevent clients from paying twice for the same performance. When a hedge fund's value drops, the manager will not receive an incentive fee until the value of the fund returns back to its previous level.