Experience the Power of a Managed Account

Two complaints we hear from retail clients are that they are unable to participate in professionally managed trading programs because they do not have sufficient equity or, on the other hand, they do not want to commit large sums to a trader until they are satisfied with the trader's performance. Many CTAs establish an entry threshold at $100,000. For many clients this level of commitment is not an issue; but they want to start with a smaller amount. For others, the threshold is prohibitive. The managed account offers a solution which permits accounts of all sizes to participate in a professionally managed trading program without having to buy into a managed futures fund or establish a large account with a CTA. The managed account offers a flexible and elegant solution for all clients.

In a managed account the client is able to participate in trades regardless of account size. The traders take a cumulative or "notional" view of all the accounts they manage and consider the total equity of all the accounts when placing a trade. Since forex traders can buy and sell in virtually any amounts, rather than standard preset futures contract sizes, investors of all sizes can participate. Each individual account comprises a portion of a "notional" account value. With this approach even smaller accounts can be accommodated. Each account gets a "piece" of the trade, and the profit and/or loss realized from the trade is automatically allocated to individual accounts based on the percentage of assets in the account relative to the total combined assets in all the accounts.

For example, assume there are four clients with managed accounts. One client has $120,000 in equity, another has $40,000 in equity, another has $15,000 in equity and the fourth has $5,000 in equity. For trading purposes, the trader looks at the four accounts as though they were one notional account with $180,000 in equity. Now assume the trader does a trade that results in a profit of $6,700. The $120,000 account would receive $4,468.90; the $40,000 account would receive $1,487.40; the $15,000 would receive $556.10 and the $5,000 would receive $187.60. Conversely, had the trade resulted in a loss, the loss would have been allocated in the same percentages across the four accounts.

With a managed account, clients get the benefit of combined trading power based on their cumulative equity, while retaining their individual accounts with no commingling of funds. The managed account offers clients the best of both worlds.