A managed Forex account is a type of account in which a professional money manager trades a client account for a fee. By this way, investors can save precious time, earn stable returns, and reduce their overall portfolio risk.
Investors can choose between various types of managed accounts, but we focus on the PAMM, LAMM, and MAM accounts. The reason is that these three account types offer extended flexibility, low entrance requirements, and anti-fraud protection. PAMM investors are dealing directly with the Forex broker of their choice and money managers have no access to the investor’s capital.
What is Actually a Managed Forex Account?
A managed Forex account is a segregated trading account owned by each investor but managed by a professional money manager. A managed account should offer safety, transparency, flexibility and full control.
General Types of Managed Accounts
There are five general types of managed accounts: individual, pooled, PAMM, LAMM, and MAM.
(a) Individual Accounts
This is a classic account type and refers to an individual account where a professional money manager trades on the behalf of an investor. Usually, there are minimum deposit requirements that exceed $10K. The management fees are customizable, but as in any other managed account type, the fees are based on the performance.
Needs a lot of caution
High deposit requirements
(b) Pooled Accounts
The pooled account type refers to an account type where many investors join their capital in a single fund and share fees, profits, and losses. The main advantage of a pooled account compared to an individual account is the lower deposit requirements. The deposit requirements start as low as $2K. The main disadvantage of a pooled account is the minimum period required before investors can withdraw their capital without a penalty.
Lower deposit requirements
Shared expenses and standard fees
Minimum period before investors can withdraw their capital
Penalties for early exit (withdrawal)
(c) PAMM/LAMM, and MAM Accounts
These managed account types use software technology to allocate gains, losses and performance fees on an equal percentage basis to each investor. The main advantage of these account types is the fraud-protection as investors are dealing with a Forex broker of their choice and money managers have no direct access to the investor’s capital. In addition, the minimum capital requirements are very tight, starting as low as $500.
The lowest deposit requirements
No minimum periods before investors can withdraw their capital
Advanced flexibility and safety of funds
Offers portfolio diversification through limited capital allocation
Advantages of PAMM/MAM Accounts
(1) Investors maintain full control over their account balance, while they can withdraw their funds at any time
(2) Money managers trade the accounts but have no access to the investor’s account balance
(3) Investors can save precious time and take advantage of a great variety of successful Money Managers
(4) Investors have the ability to monitor in real-time their managed account, including profits, losses, account balance, and all open and closed trades.
(5) According to the agreement (LPOA) between the investor and the manager, investors may have or not the chance to put their own trades on a managed account. More information about the LPOA agreement below.
LPOA (Limited Power of Attorney Agreement)
An LPOA allows any person to designate someone else in order to manage specific financial activities on his behalf. The LPOA describes the legal framework in which the agreement between the two parties will take place. The document also describes the success fees of the money manager, as follows:
Management Fee: …………….. % per ……………..
Incentive Fee: …………….. % calculated and paid……………..
PAMM, LAMM, and MAM Accounts Explained
Investors can choose between PAMM, LAMM, and MAM account types. These three managed account types use different account software technology to allocate gains, losses and performance fees on an equal percentage basis to each investor. The main advantage of these three account types is the fraud-protection as investors are dealing with a Forex broker of their choice and money managers have no direct access to the investor’s capital.
(1) Multi-Account Manager (MAM) Accounts
A MAM Account allows a money manager to manage multiple investor accounts using a single terminal. Usually, the master terminal is the MT4 multi-terminal. When a trade order is executed on the master account, it is reflected instantly on all associated investors MAM accounts. MAM accounts offer maximum flexibility and control.
These are some key MAM account features:
(i) The MAM account is a combination of the features offered by PAMM and LAMM accounts
(ii) The money manager is paid a performance fee as a percentage of his returns
(iii) Each investor can set his own parameters as concerns order execution
(iv) Each investor can modify any MAM trades at any time
(v) Each investor can execute his own trade orders in the same account
(2) Percentage Allocation Management Module (PAMM) Accounts
As the name “Percentage Allocation” suggests, a PAMM account allows investors to allocate only a percentage of their entire capital to reflect a master account. That means they can reduce their risk exposure significantly. In addition, investors can follow different money manager in the same account and thus diversify their trading process.
These are some key PAMM account features:
(i) The money manager is paid a performance fee as a percentage of his returns
(ii) PAMM accounts distributes gains or losses based on the percentage allocation (%) set by each investor
(iii) PAMM accounts offer the chance for real portfolio diversification as an investor can allocate only a small portion of his capital to a single money manager and choose to include multiple money managers
(3) Lot Allocation Management Module (LAMM) Accounts
The LAMM (Lot Allocation Management Module) account type allows money managers to set a number of lots that will be traded by each investor’s account. That means money managers can use different levels of leverage for different investor accounts.
These are some key LAMM account features:
(i) The LAMM account type is a variation of a PAMM account specifically designed to fit the needs of large investors
(ii) The LAMM account type is reducing the risk of large accounts with a lot of cash
(iii) The money manager is paid a performance fee according to the multiples of lots invested
(iv) The profits or losses are distributed according to the multiples of lots invested
Opening a MAM/PAMM Forex Account -How it works?
Here is how a managed Forex account works in general:
(i) The investor decides which type of managed account fits his needs (PAMM, LAMM, or MAM)
(ii) The investor opens a trading account with a regulated Forex broker that offers the selected type of managed account
(iii) The investor finds some money managers that he considers reliable according to their professional experience and their past performance of at least 2 years
(iv) The investor signs an LPOA (Limited Power of Attorney agreement) which is a document between the investor and the money manager allowing the money manager to trade an individual account
(v) The investor funds his account and sets the parameters for the money manager to trade
(vi) The money manager starts to trade but only the investor maintains full access and control over the account
(vii) Investors can revoke the LPOA agreement anytime they want
Compare MAM/PAMM Managed Forex Accounts
Here are some regulated Forex brokers providing PAMM/MAM managed Forex trading accounts:
|PAMM BROKER||PAMM FEATURES||TRADING FEATURES||ACCOUNT FEATURES||LINKS|
Regulation: CySEC, FSC BVI
Account Segregation: Yes
Swap-Free Accounts: Yes
HOTFOREX V2 PAMM ACCOUNTS
Bonus: Up to 100% Cash Bonus
Rebate: $1.5/lot (Forex-Rebates.com)
Min. Account: $5
Funding Account: Wire, Cards, Skrill, Neteller, WebMoney, and more
Regulation: MiFID (EU)
Account Segregation: Yes
Swap-Free Accounts: Yes
DUKASCOPY PAMM ACCOUNTS
Bonus: 10% Equity Bonus
Rebate: 30% for the 1st month of trading
(Rebate Link on the right)
Min. Account: 100 USD
Funding Account: Cards, Bank Wire
■ Managed Forex Accounts
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