Managed Accounts is a term used in the forex trading industry that refers to trading accounts that are managed and traded by someone else other than the account holder. The account manager or money manager is usually an experienced professional who is part of a reputable company that provides this type of managed service to traders and investors. One of the main benefits is the investor have full transparency and control over their funds and may opt in or out at any time without penalty.
According to Investopedia, “A managed account is an investment account that is owned by a single investor, either by an institutional investor or an individual or retail investor. A professional money manager, hired by the investor oversees the account. Armed with discretionary authority over the account, this dedicated manager actively makes investment decisions pertinent to the individual, considering the client’s needs and goals, risk tolerance, and asset size. They hold many benefits for the high net-worth investor.”
How Managed Accounts Works
Managed accounts may contain different types of financial instruments, but in this case, we are talking about forex managed accounts. In the case of forex managed accounts, the account manager or money manager of the managed account is granted authority to buy and sell currency pairs. Signed consent is usually required to be provided by the client.
These managed accounts generally have a minimum deposit to participate and a fee attached to compensate the manager for his efforts. In many cases, money managers will charge an annual fee, usually calculated as a percentage of the total accumulated funds under management or assets under management (AUM). This is generally a small 1-2% of the total. Other compensation plans may include a profit split between the trader and the client, and this is usually calculated on a high watermark basis to the benefit of the client. To read more about how high watermark works, you can click here.
Pros of Using Managed Accounts
- Hands-free trading solution that does not require much trading knowledge
- Customized managed accounts may address specific clients needs
- Trades may minimize tax liabilities
- Investors have maximum transparency and control
- Clients can leave at any time without penalty
- Minimum to no trading experience needed to participate
Cons of Using Managed Accounts
- They often require large deposits to participate
- Compensation for traders may impact overall return
- Portfolios are customized to the specific risks, goals of the account manager
Learn more about our Forex Managed Accounts by clicking here.
Get Started with our Forex Managed Accounts by clicking here.