If you desire another opportunity to make money through Forex trading and you want someone else, a more experienced trader or professional organization, to handle all of your trading for you, then a Forex managed account program is what you’re looking for. The idea is that while someone else is managing your account you can sit back and watch your returns, but we would strongly suggest that because of the risk levels involved in trading CFDs, you should still understand how Forex trading works.
Forex Brokers – Managed Accounts
|Broker||Managed Account Performance||Regulators||Next Step|
|– Performance Analysis Monthly: 6.8% (Portfolio 1)|
– All-time Performance Analysis: Since March.17: 72.55%
– Management Fee Monthly: None
– Performance Fee Monthly: 35% of profits
– Minimum Investment: $10,000
|– Performance Analysis Monthly: 2.2% (hybrid model)|
– All-time Performance Analysis: Since Jun.16: 30.3%
– Management Fee Monthly: 0,167%
– Minimum Investment: $3000
|– Performance Analysis Monthly:0.92% 6 Month:1.17% YTD:1.48%|
– All-time Performance Analysis: Since Jan.15: 9.70%
– Management Fee: 1,5%
– Minimum Investment: €2500/$2500
How Forex Managed Accounts Works?
The Forex managed account solution lets you hire a professional and profitable trader to manage your Forex trading account. In exchange for his service, the professional trader will usually be paid accordingly to a performance fee. This performance fee can vary anywhere between 20% and can go as high as 50%. In other situations, you might also be charged an account management fee depending on the person or the firm who will be the money manager. This management fee can range from 1% to 4% per annum, with 2% being the standard management fee.
The money manager will only have access to open and closed positions in your name. At no time will anybody ever have access to your funds except you. You can still keep track of your profits and account performance via the trading platform but you’ll not be able to open and close positions. However, in extreme situation, you still have the option to instruct your broker to close all the trades and give you back the control over your account.
A Limited Power of Attorney is also required to be signed by the money manager and the investor which is the legal framework that will allow the money manager to trade investor account. This power of attorney will also contain all the details and restrictions in terms of money management that the money manager has to comply with.
Forex Managed Account Types
Either if you’re a profitable money manager who seeks to boosts his assets under management or you’re simply a trader that wants to profit from the Forex market a Forex managed account program can bring these two entities together. The two most widely used Forex managed account solution available for investors and money managers are:
- PAMM – Percentage Allocation Management Module.
- MAM – Multi Account Manager
The MAM account uses a fixed lot allocation that can be predefined based on the client’s risk profile. This means that no matter how bigger the position size of the account manager is the trade will be copied into your account based on the predefined lot size. Each time the money manager opens a position this will be automatically be copied into your account.
The PAMM account uses, as the name suggests, a percentage allocation module that will distribute the size of the trades (and the profits) according to the share distribution between investors.
Let’s assume Mark is a money manager with an account of $100,000 and he has two investors: Joe with a $50,000 account and James with an $80,000 account. The total funds under management are now $230,000.
The percentage allocation module will distribute the lot size according to each account share ratio as follows:
If manager Mark decides to buy $10 million notional value of USD/JPY then the allocation ratio will look like in the figure below:
Let’s take this example one step further and assume at the end of the month our money manager Mark makes 30% profits which is $69,000. Based on the allocation ratio of each individual account the 30% profits will be distributed as follow:
- Investor Joe takes 22% which is equivalent of $15,180, but we need to deduct the 20% performance fee which will be paid to manager Markà Joe is left with $12,144 profit.
- Investor James takes 35% which is equivalent to $24,150, but we need to deduct the 20% performance fee which will be paid to manager Markà James is left with $19,320 profit.
- Manager Mark takes 43% which is equivalent to $29, 670, but Mark also earns an extra $7866 deducted from both investors.
A Forex managed account provides both the money manager and the investor with a transparent environment, safety, and security of funds. There are benefits for both sides; the money manager earns an extra profit from collecting the management fee while the investor can earn profits from the Forex market without the need to have a strategy.