In recent years, new functions and features have appeared in trading and forex platforms that have helped transform the industry in a remarkable way. One of the functions that have had the most impact is the birth of social trading together with the possibility of offering professional managers the right tool to know how to create an investment fund, being able to manage in a proper and simple way the capital of several clients from a centralized account.
Although there are various technological solutions for implementing an investment fund, such as MAM (Multi Account Manager) or LAMM (Lot Allocation Management Module), the most widely used formula is currently known as PAMM (Percent Allocation Management Module) accounts. PAMM accounts allow managers to create a mutual fund and operate several accounts at once centrally from a master account without having to create a legal structure such as a mutual fund. This is achieved through a master account into which all clients’ capital is integrated and from which they can trade comfortably and with full control.
How to set up a mutual fund: find out everything you need to do so
Partners in the PAMM investment funds
1. Money Manager: manages the investment fund and invests the money on behalf of the investors. He only has the power to buy and sell, he does not have access to movements or investors’ money
2. Investors: these are the manager’s clients. They deposit their capital in the investment fund to be managed and can access their funds to consult and withdraw their funds whenever there are no open positions.
3. Broker: the entity that makes the trading platform available and acts as an intermediary between the manager and the investors. It is in charge of making the withdrawal of commissions on profits
4. Technology provider: it is the one that provides the broker with the appropriate technological tools so that it can offer its services properly.
Most important features of the investment fund created with PAMM accounts
· Distribution of the operations in proportion to the balance sheet by the investors’ equity or by lots.
· To open a PAMM Account, the manager normally needs to have the initial capital of his own, is held in the capital fund, to ensure that the interests of the manager and investors are aligned.
· These allow simultaneous trading on an unlimited number of accounts without the need to reconcile or balance books, as this is done automatically
· Approach problems with of other systems such as MAM are minimised.
· High customization of the type of commissions to be charged and automatic management of the corresponding payment from the investment fund.
· When an investor withdraws capital from a PAMM account, the proportional part of the operation is not automatically closed.
· Real-time order and risk control that allows investors to follow their investment fund closely
How to create an investment fund by contracting a PAMM Account service
This service, along with others such as social trading or liquidity bridge, is among the services offered by investment platform providers such a MetaTrader 4 (also known as the MT4 Platform) so we must find a provider who not only offers a platform that fits our needs but also offers all the services and features we need, such as PAMM accounts to allow managers to create their investment fund on our platform.
With its increasing popularity, offering PAMM accounts as part of a broker’s strategy makes increasing sense. In short, the creation of a mutual fund through PAMM accounts is a simple yet flexible service that has become indispensable, since on the one hand managers can manage their clients’ capital very easily, and on the other hand traders can choose a manager who manages their funds transparently and quickly.
Now that you know how to set up a mutual fund, would you like to try it out? At Smart Broker Solutions we can advise you, contact us!