Education · PAMM
PAMM account: how it works, how profits are shared and what to ask
This guide goes deep on pooled accounts: how shares are worked out, what happens to them when money moves in or out, when fees are taken and what the manager's offer should say.
What is a PAMM account?
PAMM stands for Percentage Allocation Management Module. It is a pooled account where one manager trades the combined money of several investors. Each investor owns a percentage share of the pool. Profit and loss from the manager's trades are split in line with those shares.
The investor does not place trades. The manager does. The investor chooses a manager, deposits money, and can usually see the pool's results and their own balance. The manager trades the pool as a single account, which keeps the work simple for them.
How does PAMM allocation by share work?
Your share is your equity in the pool divided by the pool's total equity. Every trade result is divided in that proportion, so an investor holding 60 percent of the pool receives 60 percent of the result. When someone deposits or withdraws, shares are recalculated so that new money does not claim past profit.
Hypothetical example: A pool holds 10,000 dollars. Investor A has put in 6,000 (60 percent). Investor B has put in 3,000 (30 percent). The manager has put in 1,000 (10 percent). The manager's trades make 500 dollars before any fees.
Investor A's share is 300 dollars. Investor B's share is 150 dollars. The manager's own share is 50 dollars. If the trades had lost 500 dollars instead, the same percentages would apply and the losses would be 300, 150 and 50. Any fees are deducted from each investor's share of the profit, on the terms the manager sets, so investors receive less than these gross figures. These figures are sample numbers only.
This guide covers the pooled model in detail. To compare it with MAM, copy trading and discretionary accounts, read our guide to managed forex accounts.
What happens to shares when investors deposit or withdraw?
Shares are recalculated at the moment money moves, using the pool's equity at that time. A new investor buys in at today's value, so they do not receive profit earned before they joined. A withdrawing investor leaves with their current share, and everyone else's percentage is worked out again over the smaller pool.
Hypothetical example: After the 500 dollar gain above, the pool's equity is 10,500 dollars. Investor A holds 6,300 (60 percent), Investor B 3,150 (30 percent) and the manager 1,050 (10 percent). Investor C then deposits 10,500 dollars. The pool is now 21,000 dollars, so the shares become A 30 percent, B 15 percent, the manager 5 percent and C 50 percent.
The next trades gain 5 percent, or 1,050 dollars before fees. A receives 315, B 157.50, the manager 52.50 and C 525. C shares only in this gain, not in the earlier 500. These figures are sample numbers only.
What does a PAMM account look like for the investor and the manager?
An investor chooses a manager, funds the pool and tracks results. A manager runs the strategy, sets the terms and answers for the pool's performance. Each side sees different things, and each carries different risks.
The investor's view
You select a manager, deposit and monitor your share. You see your balance, the pool's history and the fees charged. You cannot change the manager's trades. Your risk is losing money, and your return depends on one person's decisions.
The manager's view
You trade one account while the system divides the results among investors. You set a strategy and terms, and you answer to the people who trust you with their money. If you are a manager, see Money Manager / PAMM.
When are PAMM fees calculated and paid?
Many pools calculate performance fees at the end of a set period, called a rollover, such as a week or a month. The fee applies to each investor's profit for that period and is deducted from that investor's share. The manager's offer should state the period, the rate and the payment date. Terms vary by provider.
A management fee, if charged, is taken on the money managed and is paid whether the pool gains or loses. A high-water mark stops a performance fee being paid twice on the same recovery. Our managed accounts guide explains it with an example. Spreads and swaps also reduce the pool whatever fee model is used.
What are the risks of a PAMM account?
You can lose money, and the manager cannot promise any result. A pool shares losses in the same proportion as profit. Your results depend on one manager's skill and discipline, and other investors' withdrawals can affect the pool.
Market and leverage risk
Trading is leveraged. A large move against open positions can cut the pool's value quickly. CFD losses can exceed deposits.
Manager risk
A manager can take more risk than stated, change style, or make errors. A strong past does not predict a strong future.
Pool effects
Large deposits or withdrawals by other investors can force the manager to close trades at a poor time.
Fees and terms
Fees reduce returns. Lock-ups or notice periods can slow your exit.
What should a PAMM manager's offer say?
A PAMM manager publishes an offer that sets the rules of the pool. Read it in full before you deposit. It should state how shares are calculated, when fees are taken and what happens to open trades when money leaves the pool. For checks on the manager and the provider, see the due-diligence list in our managed accounts guide.
- ✓ The rollover period and the exact time fees are calculated.
- ✓ Whether the minimum deposit and the manager's own stake in the pool are stated.
- ✓ How a withdrawal is valued, and whether open trades are closed or left running.
- ✓ Any notice period or lock-up before you can withdraw.
- ✓ The risk limits the manager follows, such as a maximum drawdown, and what happens if they are reached.
AQ Markets Ltd. is not regulated by any financial services regulator. See our regulatory status for details. For a managed product from AQ Markets, see the Opulence Managed Trading Account.
Risk warning. A PAMM account does not remove trading risk, and no manager can promise a result. CFDs are leveraged and losses can exceed your deposit. This guide is education, not advice. Read our Risk Disclosure before trading.
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