A MAM (Multi-Account Manager) account is a managed forex trading account that allows professional traders or money managers to control multiple investor accounts from a single master account. This system enables fund managers to execute bulk trades and allocate them across individual accounts based on customized distribution methods.
Unlike standard managed accounts, MAM accounts offer enhanced flexibility by allowing fund managers to apply tailored risk and trade allocation strategies for each investor. They can customize risk exposure, leverage, and lot sizing per sub-account, providing a more personalized investment approach. This structure benefits both investors, who gain access to professional trading expertise without direct involvement, and fund managers, who can efficiently manage multiple portfolios.
MAM accounts differ from PAMM (Percentage Allocation Management Module) accounts in their allocation methods, which are not strictly proportional but can be adapted to individual investor preferences. Investors typically have some control over allocation settings, but their ability to modify participation is often subject to the fund manager’s guidelines.
How do MAM accounts work?
In MAM accounts, the money manager can assign different allocation methods to each investor account. This means that the allocation is not strictly proportional to the investor’s contribution. Instead, it can be tailored based on specific investment strategies, risk appetites, and preferences of individual investors.
Once an investor decides on a money manager and the amount of money to be managed, the process of trade allocation in a MAM account is somewhat different from other managed accounts like PAMM.
In fact, what sets MAM accounts apart is the level of control and customization investors have over their investments, as they can set parameters like leverage and risk levels, which influence how their portion of the pool is traded.
The ability for an investor to modify their allocation in a MAM account is subject to variation, and it is generally limited. This restriction primarily stems from the preferences of money managers, who tend to discourage frequent changes in order to maintain a certain level of stability and predictability in their management strategy.
What determines the investor’s trade size in a MAM account?
The investor’s trade size in MAM accounts depend on the allocation method chosen. The MAM account allocation methods are listed below.
- Balance allocation: works similar to a PAMM account: the investor will gain and lose money as a percentage of what he is contributing to the system. If he has invested $1000 out of a total of $10000, he will lose and gain 10% of what the fund manager generates.
- Equity allocation: works similarly to balance allocation, but also takes into account open positions. So, let’s suppose Investor A has an account balance of $30,000 and open positions valued at $5,000 (total equity of $35,000), while Investor B has a balance of $60,000 and open positions valued at $10,000 (total equity of $70,000). The total equity is $105,000. If a trade of $10,500 is placed, Investor A’s portion would be $3,333 (1/3 of $10,500, as $35,000 is 1/3 of $105,000), and Investor B’s portion would be $7,167 (2/3 of $10,500).
- Lot allocation: the MAM system will allocate a fixed amount of lots regardless of the amount held into the investors trading account. For example, both the fund manager and the investor might decide to invest a uniform amount of 1 micro lot in each trade, irrespective of whether the account’s balance is $5,000 or $100,000.
- Risk allocation: this is based on the risk profile of each investor. Accounts with higher risk tolerance will receive a higher exposure to the markets, compared to those traders who prefer a lower risk. If a trade worth 10 lots is to be allocated and the risk preference ratio is 1:3 (low:high risk), then Investor A would receive 2.5 lots and Investor B would receive 7.5 lots.
- Tiered allocation: this operates as a hybrid system, enabling fund managers to categorize investor accounts into distinct tiers. The allocation for each account varies based on the specific tier it falls into.
Can investors set allocation preferences in a MAM account?
Yes, investors have the autonomy to select their allocation method when they are under the management of a MAM money manager.
This contrasts with other managed accounts, such as PAMM accounts, which typically operate on a fixed percentage model tied to the total pooled assets.
Compared to these, MAM accounts offer significantly more flexibility, allowing for customization on an account-per-account basis. This means that each investor can have a say in the allocation method, tailoring it to align with their individual preferences.
How frequently can investors make changes to their MAM account?
The extent to which investors can modify their participation in a MAM account depends on the guidelines and trading strategies of the money managers.
When choosing a money manager, investors implicitly consent to specific time limitations. These limitations delineate a minimum time frame during which the invested funds and asset allocation remain committed to the collective asset pool.
Generally, this obligatory period varies, often spanning from one to three months. However, the exact length of this period is determined by the money manager, based on their unique approach to trading and strategy execution.
How does MAM compare to other managed accounts?
The table comparing MAM accounts to other managed forex accounts is shown below.
| MAM | PAMM | LAMM | RAMM | |
|---|---|---|---|---|
| Factors | Multiple allocation methods | Proportional to client’s percentage share | Based on fixed lots | Based on a predetermined risk level |
| Allocation Method | Customizable per account | Uniform risk distribution | Uniform risk distribution | Uniform risk distribution |
| Type of risk | High | Moderate | Low | High |
| Flexibility | Best MAM brokers | Best PAMM brokers | Best LAMM brokers | Best RAMM brokers |
What are the advantages of MAM accounts?
The advantages of MAM accounts are listed below.
- Limited Market Knowledge Friendly: MAM accounts, being managed accounts, enable investors to be involved in trading without requiring deep market understanding.
- Opportunity to Earn Commissions: Professionals who manage these funds have the chance to earn commissions from the trades they execute.
- Flexible Risk Management: MAM accounts provide fund managers the ability to adjust risks for each sub-account, aligning with individual client risk preferences.
What are the disadvantages of MAM accounts?
The disadvantages of MAM accounts are listed below.
- Limited Investor Control: Investors have minimal influence over their fund’s investment decisions, making it less suitable for those who prefer hands-on management.
- High Fee Structure: Investors with a MAM account will be charged performance fees on top of other fees (such as deposit and withdrawal ones).
- Risk of Manager Performance: The success of a MAM account depends entirely on the fund manager’s skill and strategy. If the manager makes poor decisions, investors may suffer significant losses with no control over individual trades.
Are MAM accounts safe?
MAM accounts are generally regarded as safer options compared to trading alone, yet traders must remain aware of the inherent risks of forex trading.
In fact, statistical data indicates that a significant proportion of retail investor accounts, ranging from 74% to 89%, experience losses. This highlights the risk associated with forex trading, which is inherently volatile and can lead to financial losses even when using structured investment strategies like MAM accounts.
The security of MAM accounts is enhanced through a series of regulatory and protective actions undertaken by brokers and financial authorities. These measures are designed to monitor and regulate the activities of MAM managers, ensuring compliance with industry standards and reducing the likelihood of fraudulent or reckless management.
While these protective actions provide an added layer of safety, traders should still conduct thorough due diligence before investing. Factors such as broker reputation, regulatory status, and past performance of the MAM manager can influence the overall security of the investment.
Ultimately, while MAM accounts offer a structured approach to forex trading, they do not eliminate risks. Traders should be aware of potential losses and ensure they choose a well-regulated broker with a proven track record to maximize security
What are the best MAM account brokers?
The best MAM forex brokers are listed below
- FP Markets: Best for low spreads and fast execution. FP Markets offers MAM accounts with unlimited sub-accounts, three allocation methods, and EAs support. With an average EUR/USD spread of 0.09 pips and a $100 minimum deposit, it provides fast execution and cost-efficient trading for fund managers.
- Vantage: Best for customizable allocation methods and platform diversity. Vantage offers MAM accounts with unlimited sub-accounts, ten allocation methods, and MT4, MT5, and ZuluTrade compatibility. With a 0.00 pips average EUR/USD spread and $200 minimum deposit, it supports EAs, hedging, and scalping.
- Axi: Best for allocation flexibility and strong regulation. Axi provides six allocation methods, unlimited sub-accounts, and EAs support. It has a 0.0 pips EUR/USD spread, is regulated by FCA, ASIC, and DFSA, and has a recommended $250 minimum deposit for fund managers.
Do all Forex brokers offer MAM accounts?
Not all Forex brokers offer MAM accounts. However, many of the world’s top Forex brokers do provide managed account solutions, and these frequently include MAM accounts. Some brokers even offer a hybrid solution that combines features of MAM and MAM accounts, giving traders and fund managers more flexibility to tailor their approach to their needs.
Many of the leading Forex brokers recognize the demand for managed account solutions. The best forex brokers cater to traders who prefer professional management of their funds, often including MAM accounts in their offerings. This allows fund managers to efficiently handle multiple accounts while executing trades on behalf of their clients.
Some brokers go a step further by providing a hybrid model that blends MAM and MAM account features. This mixed approach enhances customization, enabling traders and fund managers to select the most suitable trading method. It accommodates different strategies and risk management preferences, making it a valuable option for those looking for flexibility.