Managed Accounts

Print PDF

Written by Administrator | Saturday, 04 June 2011 13:31

Management and Investment

A successful trader, Smith, opens a PAMM Account at Alpari and becomes its Manager. The Manager’s Capital is 20,000 USD (pic. 1). Smith then presents Alpari clients with the opportunity to place their funds under his management. The Manager (Smith) proposes to share the profit between the Investors every month (trading interval), while 20% will go to the Manager (Smith) as remuneration for his work.

1.png Pic. 1. PAMM Account 20,000 USD.

Investors Simpson (Investor 1) and Ford (Investor 2) decide to invest their funds in Smith's (Manager's) PAMM Account. Simpson and Ford invest 50,000 USD and 30,000 USD respectively. Thus, the PAMM Account balance, including the Manager's capital, is 100,000 USD (pic. 2).

2.png Pic. 2. PAMM Account balance at the start of work on the account

Due to the Manager's successful performance, the PAMM Account makes a 50% profit (50,000 USD) on the intitial deposit (100,000 USD) in the first month and the PAMM Account balance becomes 150,000 USD.

Respectively, Investor 1 (Simpson) makes a 50% profit (25,000 USD) on his original investment (50,000 USD) and pays the Manager remuneration in the amount of 20% (5,000 USD) of his profit.
Investor 2 (Ford) makes a 50% profit (15,000 USD) on his original investment (30,000 USD) and pays the Manager remuneration in the amount of 20% (3,000 USD) of his profit (pic. 3).

3.png Pic. 3. PAMM Account balance at the end of the first month

The Manager’s (Smith's) work on the PAMM Account during the first month results in a net profit of 50,000 USD:

  • Investor Simpson — 20,000 USD
  • Investor Ford — 12,000 USD
  • Manager Smith — 18,000 USD (10,000 — profit on his share, 8,000 — Manager’s Remuneration)

At the beginning of the second month, the Manager (Smith) withdraws his profit (18,000 USD), Investor 1 (Simpson) completely reinvests (reinvestment — buildup of earlier investments using profit made on them) all his funds (70,000 USD), and Investor 2 (Ford) withdraws 2,000 USD and reinvests his remaining funds (40,000 USD) (pic. 4).

4.png Pic. 4. Reinvestment and Withdrawal of Funds

Another Investor, Jackson (Investor 3), joins the PAMM Account and invests 10,000 USD (pic. 5).

5.png Pic. 5. The PAMM Account balance at the start of the second month

Due to the Manager's successful performance, the PAMM Account makes a 100% profit (140,000 USD) on the initial deposit (140,000 USD) in the second month and the total PAMM Account balance becomes 280,000 USD.

Respectively, Investor 1 (Simpson) makes a 100% profit (70,000 USD) on his original investment (70,000 USD) and pays the Manager remuneration in the amount of 20% (14,000 USD) of his profit.
Investor 2 (Ford) makes a 100% profit (40,000 USD) on his original investment (40,000 USD) and pays the Manager remuneration in the amount of 20% (8,000 USD) of his profit.
Investor 3 (Jackson) makes a 100% profit (10,000 USD) on his original investment (10,000 USD) and pays the Manager remuneration in the amount of 20% (2,000 USD) of his profit (pic. 6).

6.png Pic. 6. PAMM Account balance at the end of the second month

The Manager’s (Smith's) work on the PAMM Account during the second month results in a net profit of 140,000 USD:

  • Investor Simpson — 56,000 USD
  • Investor Ford — 32,000 USD
  • Investor Jackson — 8,000 USD
  • Manager Smith — 44,000 USD (20,000 — profit on his own share, 24,000 — Manager’s Remuneration)

This example has described the general framework of work on a PAMM Account at Alpari. It is intended to show you the opportunities to profit from the management and investment of funds.