The financial market is constantly evolving, presenting fund managers and professional traders with new opportunities to potentially earn additional passive income. With the emergence of innovative trading accounts, tools, and approaches, these opportunities have become more accessible.
Continue reading to dive deeper into the MAM account, understanding how it works and the benefits it provides.
What is a MAM Account
A MAM account, which stands for “Multi-Account Manager,” is a specialised type of trading account used in the financial world and offered by brokers. To better illustrate this account, you can think of it as the main account used by the fund manager or professional trader to manage multiple other individual trading accounts simultaneously. Instead of logging into each account separately, the manager uses the MAM account to execute trades and set trading strategies for all connected accounts at once.
For individual traders, this account enables them to enlist the expertise of an experienced trader or fund manager to oversee their accounts and execute trades on their behalf. Traders can still manually adjust allocation percentages for their executed trades. While the main account remains under the control of the professional fund manager or trader, individual traders retain complete control over their respective sub-accounts and they can also choose to deposit and withdraw funds from their sub-accounts at any time.
How does a MAM account work
A fund manager will be in charge of the MAM main account to manage the multiple individual trading accounts. Once a trade is placed on the main account in the single trading platform, the system will automatically replicate them and distribute the trading order across all the individual trading accounts according to the set allocation method. This ensures that trades are proportionally executed across the client’s accounts in line with their specified allocation percentages.
In addition, the fund manager has the flexibility to manually adjust allocation percentages, designate varying trade volumes to different sub-accounts, or group certain sub-accounts for specific trading strategies. This versatility allows the fund manager to tailor their trading approach to best serve their clients’ needs.
For example, let’s consider a MAM fund manager who oversees the trading activity for three clients:
Sub Account for Client A = 1% allocation percentage
Sub Account for Client B = 2% allocation percentage
Sub Account for Client C = 6% allocation percentage
If the manager decides to execute a trade of $10,000, the MAM system can distribute the trade based on the proportional allocation percentages set for each client’s account. In this scenario:
Sub Account for Client A = Trade size executed will be $100 (1% of $10,000)
Sub Account for Client B = Trade size executed will be $200 (2% of $10,000)
Sub Account for Client C = Trade size executed will be $600 (6% of $10,000)
In total, the trades executed for these clients would amount to $900, ensuring that the trading strategy and its outcomes are uniformly applied across all the participating client accounts according to their predetermined allocation percentages.
The MAM account manager earns a fee based on a predefined fee structure agreed upon with the clients.
Benefits of MAM Account
Here are a few benefits of using a MAM account:
A fund manager or professional trader can efficiently manage multiple sub-accounts simultaneously using a single platform. This streamlines overall operations and reduces the time spent on managing each sub-account individually.
- Proportional Allocation
Trades are distributed among client sub-accounts based on predetermined allocation percentages, ensuring fair and proportional trade distribution. This method respects each client’s chosen risk level and trading preferences, ensuring their participation in trading activities aligns with their individual goals.
- Better risk management
The main MAM account can be used to set different risk management parameters for each client’s sub-account. This allows them to utilise tools such as stop-loss and take-profit levels to help minimise the risk of loss according to their individual risk appetite.
Many MAM platforms provide real-time reporting and analytics, offering clients a clear and detailed view of their account performance and trade details. This transparency ensures that clients are always informed about their trades, fostering trust and promoting a deeper understanding of how their assets are managed. With direct access to real-time data, clients can make more informed decisions about their accounts and the management of their portfolios.
Are MAM Accounts Safe?
The safety of MAM accounts highly depends on the broker system’s protection, the broker’s reputation, and the fund manager’s performance.
Firstly, the security of the system is paramount. A well-secured MAM account should employ strong encryption and safety measures to guard against potential breaches and unauthorised access. This ensures that both data and funds are shielded from malicious actors.
Secondly, the reputation of the broker hosting the MAM account is crucial. Established and reputable brokers typically have stringent safety protocols in place and are often subject to oversight by regulatory bodies. It’s always wise to choose brokers with a history of trustworthiness and transparency.
Lastly, the performance and reliability of the fund manager play a significant role in the safety of investments in a MAM account. While the system may be secure from external threats, the fund manager’s skills and decisions will ultimately determine the overall trading outcome. Potential clients should review the fund manager’s track record, experience, and credibility before deciding to select the fund manager.
Explore the Vantage’s MAM account which rewards Multi-Account Managers through commission on their clients’ trades, performance fees and management fees. Additionally, the MAM account gives account managers the flexibility to apply custom trading strategies to specific sub-account groups.
Explore the Vantage MAM Account or sign up today.