Managed account structures let one trader operate several clients' accounts from a single interface, with results allocated proportionally. The two common forms — percentage allocation management module and multi-account manager — differ in mechanics and are frequently used interchangeably in marketing.
What they share is the important property: the money stays in accounts held in the investor's own name at the broker. The manager receives trading authority, not custody.
What the structure does and does not provide
- Funds remain in your account, in your name, at the broker.
- The manager can trade but cannot withdraw to themselves.
- Allocation is proportional and automatic, by the broker's system.
- None of this limits how much the manager can lose.
How allocation works
In a PAMM structure, investor funds form a pool and each participant holds a percentage of it. The manager trades the pool as one account; profits and losses accrue to the pool and each participant's share moves proportionally. Joining and leaving happen at defined points, usually at the end of a trading period, because a mid-period entry would complicate the accounting.
In a MAM structure, each investor keeps a separate trading account and the manager's orders are replicated across them by an allocation rule — proportional to equity is the common one, though lot-based and fixed-ratio methods exist. Because the accounts are separate, participants can usually join and leave at any time, and an individual can close their own positions.
The distinction matters most for liquidity: PAMM constrains when you can exit, MAM generally does not.
Fees, and where they hide
Managers are typically paid a performance fee on profits, sometimes with a management fee on assets. The details determine whether the arrangement is fair.
A high-water mark is the term to look for. Without one, a manager who loses twenty percent and then gains twenty percent charges a performance fee on the recovery, having produced nothing. With one, no fee is charged until the account exceeds its previous peak.
The fee period matters too. A performance fee charged monthly on a strategy with volatile monthly results extracts more than the same percentage charged annually on the same annual outcome, because losing months do not refund the fees paid in winning ones — unless a high-water mark spans the periods.
No high-water mark means paying twice for the same gains
Check this before anything else. A performance fee without a high-water mark rewards volatility rather than performance, and the manager's incentive is then to take risk rather than to compound.
What the structure protects against
Custody risk from the manager. Because funds sit in the investor's own account, a manager who disappears cannot take the balance with them. Trading authority can be revoked, usually from the client area, at which point the manager loses access and the investor holds whatever positions are open.
This is a genuine and significant protection, and it is the reason managed structures at regulated brokers are a meaningfully different proposition from sending money to someone to trade on your behalf.
What it does not protect against
Trading losses, entirely. The manager can lose the account, and the structure imposes no limit on how fast. A manager using high leverage on a pooled account can produce a drawdown that no revocation of authority can undo, because by the time you act the loss is realised.
Broker failure, which is a separate risk unaffected by the management arrangement. The account is still at that broker, subject to that entity's segregation and compensation position.
Misrepresentation of track record. Published performance is frequently selective, and a manager with several accounts can show the successful one. Independently verified performance — from the broker's own reporting rather than from the manager's presentation — is the only kind worth weighing.
What to establish before allocating
A due diligence sequence
- Confirm the structure keeps funds in your own name and that you can revoke authority instantly.
- Read the fee terms: percentage, period, and whether a high-water mark applies.
- Ask for broker-verified performance covering the manager's full history, not a selected account.
- Look for the maximum drawdown in that history, and assume the future one is larger.
- Establish the exit terms: when you can withdraw and how long it takes.
- Check whether the manager trades their own capital in the same allocation.
- Size the allocation as money you can lose entirely.
The fourth step is the informative one. Return figures are what managers advertise; drawdown is what determines whether you will still be invested when the returns arrive.
Regulatory position
Managing other people's money is a regulated activity in most jurisdictions, and a manager operating without the relevant authorisation is doing something the regulator would object to regardless of how the broker's platform facilitates it. Structures offered through offshore entities frequently sit outside any such requirement.
That does not make every offshore managed account improper, but it does mean the recourse available if the manager behaves badly is limited to what the broker chooses to do, which is generally nothing — the broker's position is that it executed instructions from an authorised party.
Common questions
Can the manager withdraw my money?
No. Trading authority does not include withdrawal rights, and funds remain in an account in your name. The manager can lose the money by trading it, which is a different risk.
What is the difference between PAMM and MAM?
PAMM pools funds and allocates percentages, usually with defined entry and exit points. MAM replicates trades across separate accounts, which normally allows joining and leaving at any time.
What is a high-water mark?
A rule that no performance fee is charged until the account exceeds its previous peak. Without one, a manager is paid again for recovering losses they caused.
How much should I allocate?
An amount you would accept losing entirely. The structure protects custody, not capital, and a manager using high leverage can produce a drawdown faster than you can react to it.
