As a Provider, John produces $1,000 in profit for Jenna, one of his Followers, for January. With this profit, Jenna reaches a new High Water Mark (HWM), and John is compensated with a performance fee.
In March, John’s trading activity leads to Jenna losing $400, leaving her account at $600. Since John’s strategy produces no gains for Jenna, he receives no performance fee.
Then, in May, John generates $300 in profits for Jenna. However, he still receives no compensation because $600 + $300 = $900, which is less than the latest $1,000 High Water Mark.
John will receive a performance fee only when he manages to raise profits above $1,000.