Excess Gain is used to measure MSA performance relative to a benchmark, such as HWM.
Excess Gain beyond the HWM represents the amount by which the returns of a portfolio or investment exceed the returns of the benchmark.
AMSA manager is eligible to receive a ATSR Fee when the MSA NAV goes above the HWM recorded in the last settlement by a certain amount.
The certain amount is often called a “hurdle” as defined by TMAEG.
It's worth mentioning that the use of HWM and Excess Gain above it, is a common practice in hedge funds and other similar investment vehicles as it allows the fund manager to track the performance of the fund and also align their incentives with the investors as they get rewarded only when they surpass the benchmark.
Excess Gain as a percentage of ATH must be larger than the MDD as a percentage of ATH in the context of WBUF where RRR is larger than 1.
In this randomly simulated P&L equity curve chart, in order for RRR to be larger than one (1), the green Excess Gain percentage of the ATH must be larger than the orange MDD percentage of the ATH.