In the context of investment performance management and specifically when it comes to algorithmic trading strategy, High-Water Mark (HWM) and TMAEG are two important benchmarks that are used to measure the performance of an algorithmic trading strategy. The ATSR Fee is the fee that is charged to Eon Labs Ltd. for the management of their investments. The amount of ATSR Fee charged can vary depending on the characteristics of the algorithmic trading strategy and the desired compensation of the MSA manager.
For example, if an algorithmic trading strategy generates a profit of $100 and a performance fee of 20% is charged when the profit reaches $120 and TMAEG is 10%, the HWM would be set at $100, and the algorithm must generate a Excess Gain of at least 10% before any performance fee is charged. This means that if the strategy generates a Excess Gain of 10% or more, the ATSR will be entitled to charge a performance fee of 20% on the profit generated above the HWM.
In order to understand this better, let's assume that the initial investment is $1000, and the strategy generates a Excess Gain of 25%, which means that the investment is now worth $1250. The manager will be entitled to charge a performance fee of 20% on the profit generated above the HWM, which is $50 (20% of $250).