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Managed Accounts

Allocate capital to professional traders or automated strategies with high-water mark protection.

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Managed Accounts Overview

Managed accounts allow you to delegate trading decisions to an allocated trader or automated strategy. Your funds remain in your custody under your broker account while trades are executed on your behalf.

When setting up a managed account, you select a name and allocate capital. You also assign a defined risk level:

  • Low: Conservative risk parameters focusing on capital preservation.
  • Medium: Balanced risk parameters matching standard market conditions.
  • High: Aggressive risk parameters seeking higher returns with higher volatility.

The High-Water Mark Fee Structure

Performance fees are calculated using a High-Water Mark (HWM) mechanism. This structure ensures that a profit share is only charged on net new profits. If the account loses value, no performance fees are charged until the losses are fully recovered and the account value exceeds its previous peak.

The performance fee is calculated as a profit share percentage (e.g., 20%) applied to the net gain above the highest historical account value recorded (the high-water mark).

Hypothetical Illustration of High-Water Mark Calculations

The following scenario is a hypothetical illustration to demonstrate how the high-water mark is calculated and updated. It is not a representation of actual performance or a guarantee of profits.

Assume a managed account is established with a 20% profit share fee rate.

  1. Initial Allocation:

    • You allocate $10,000 to the strategy.
    • The initial High-Water Mark (HWM) is set at $10,000.

  2. Period 1 (Growth):

    • The account value increases to $11,000 at the end of the billing period.
    • Net profit is $1,000 ($11,000 current value - $10,000 HWM).
    • The 20% performance fee is calculated on the $1,000 profit: $200 ($1,000 * 20%).
    • The fee is deducted, leaving a balance of $10,800.
    • The new HWM is updated to the post-fee peak of $10,800.

  3. Period 2 (Market Decline):

    • Market volatility causes the account value to drop to $9,500.
    • No performance fee is charged because the value ($9,500) is below the HWM ($10,800).
    • The HWM remains at $10,800.

  4. Period 3 (Partial Recovery):

    • The account value recovers to $10,500.
    • Although the account gained $1,000 during this period (rising from $9,500 to $10,500), the current value ($10,500) is still below the HWM ($10,800).
    • No performance fee is charged.
    • The HWM remains at $10,800.

  5. Period 4 (New Peak):

    • The account value rises to $11,500.
    • Because the value exceeds the HWM of $10,800, a fee is due on the net new profit.
    • Net new profit is $700 ($11,500 current value - $10,800 HWM).
    • The 20% performance fee is calculated on the $700 net new profit: $140 ($700 * 20%).
    • The fee is deducted, leaving a balance of $11,360.
    • The HWM is updated to the new peak of $11,360.

Through this system, you only pay performance fees when the strategy generates new net gains, and you never pay fees on the same gains twice.