Example Calculation and Profit Distribution

The ability to manage wealth is a critical component of any long-term financial plan. For many, it means finding the right home for their money. Not everyone has the time, experience, and expertise necessary for active fund management. While some people look to squirrel their money away in mutual or money market funds, others are looking for a more active, and potentially much more lucrative approach. With Alpari's PAMM Account, you can combine the volume and liquidity of Forex with the fund management principles that can work for you in the long run. Here's how it works.

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.

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).

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).

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).

Pic. 4. Reinvestment and Withdrawal of Funds

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

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).

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.

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