That description seems to imply that if stock X ended last year at a price of 400, then this fund manager will only collect any available incentives if the stock rises above that 400 in this year. 400 is the high-water mark.
The phrase derives from sea-levels - as you look at a stony beach you will notice different water-levels.
The first is, if the tide is at its lowest possible level, the low-water mark;
the second is the highest recent water mark - this is where the damp flotsam and jetsam is tangled up in the loose seaweed.
The third will be the high-water mark - this will be the highest level at which there is any sign of seaweed growing and possibly signs of drifting detritus, usually very dry flotsam and jetsam, sun-bleached from lying there a long time since the last very high tide.
There is also a geographical high-water mark which marks on maps the highest tide ever recorded.
This is what the financial concept refers to. The fund manager is under an incentive to get rid of any fund which looks like it might be going downwards as there is no benefit in staying with a share which loses even one point off the high-water mark of the last year.