MAM stands for “Multi-Account Manager”, and is a type of managed forex trading account that allows individual traders to hand over their investment funds to a professional trader or money manager who then trades on their behalf.
The name reflects the account’s core function: managing multiple forex trading accounts from a single master account. This setup enables the manager to execute bulk orders, which are then distributed to individual investor accounts in line with the amount they have invested.
The unique aspect of a MAM account lies in its flexibility. MAM fund managers have the ability to access and manage each sub-account separately applying custom allocation methods, with this allowing them to tailor risk management according to the specific preferences of each investor.
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?
MAM investors can determine their position trading size by choosing one of the many allocation methods offered within the MAM system.
The most common MAM allocation methods are:
- 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?
Here below you can see a table comparing all the different types of managed forex accounts.
|Multiple allocation methods
|Proportional to client’s percentage share
|Based on fixed lots
|Based on a predetermined risk level
|Customizable per account
|Uniform risk distribution
|Uniform risk distribution
|Uniform risk distribution
|Type of risk
|Best MAM brokers
|Best PAMM brokers
|Best LAMM brokers
|Best RAMM brokers
MAM accounts pros and cons
- 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.
- 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).
Are MAM accounts safe?
MAM accounts are generally regarded as safe options, 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, highlighting the risk of forex trading.
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, providing an added layer of safety for investors.
What are the best MAM account brokers?
Some of the best MAM forex brokers are FP Markets, Vantage, and Axi.
These brokers all provide options for a low minimum deposit of under $200, diverse trading platforms compatible with MAM, attractively low fees, and algorithmic trading support, all of which are beneficial for fund managers.
Do all Forex brokers offer MAM accounts?
Not all forex brokers provide MAM accounts.
However, it’s worth noting that many of the world’s top forex brokers do offer managed account solutions to their customers, and these frequently include MAM accounts.
In some cases, brokers offer a hybrid solution that combines features of MAM and MAM accounts. This mixed MAM-MAM solution provides greater flexibility, allowing traders and fund managers to choose an approach that best suits their trading style, needs, and preferences.
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