The High Watermark principle is a common approach to the calculation of the performance fee. It means that the performance fee is paid only on net new rises in asset value. According to the industry standard High Watermark principle the end-of-month profit is compared to the previous month's profit. If the comparison is negative, then no performance fee is collected.
For example: we have losses of 1000 USD during the first month, but made profits of 2500 USD during the second month. This means we will get no performance/success fee for the first month, and only get performance/success fee of 30% on overall profits (2500 USD - 1000 USD) has been made in the second month, which is 30% x 1500 USD = 450 USD.