PAMM vs MAM Accounts: Whose Account Holds the Positions

Two managed-account structures are usually introduced as a choice between flexibility and simplicity. That framing skips the one difference that decides everything else: where the position physically sits once the manager clicks buy.

On a pooled arrangement the trade belongs to one account and you own a percentage of that account. On a per-account arrangement the trade is allocated into an account held in your own name. Everything that follows, from whether you can close a position yourself to how long a withdrawal takes, comes out of that single structural fact.

Whose Account the Position Actually Sits In

PAMM is a pooled structure. Investor capital is combined into a single trading account, the manager trades that one account, and each investor holds a percentage of its equity that rises and falls with the account as a whole.

MAM and LAMM are allocation structures. Each investor keeps their own trading account, the manager places one order, and the platform distributes it into those accounts according to an allocation rule.

Most comparisons stop there and call the difference flexibility. The consequence they leave out is control, and it is not small.

If the position sits in a pooled account you do not hold, you cannot close it. You cannot attach your own stop to it. It does not appear in your terminal as a position at all, because it is not your position, and a read-only login shows you the pooled account rather than a holding of your own. What you own is a claim on equity, which is a different object from a trade.

On an allocated account the opposite is true by construction: the position is in your account, so your platform can see it and, subject to what the manager agreement says about interference, act on it.

What a Limited Power of Attorney Authorises

Every legitimate managed arrangement rests on a document, usually called a limited power of attorney, and it is the single piece of paperwork worth reading in full.

It authorises the manager to place orders on the account. It does not transfer ownership of the money, and it does not make the manager the broker’s client. The word doing the work is limited: the standard limitation grants authority to trade while withholding authority to withdraw, so funds can move within the account but not out of it to a third party.

That matters more than any feature comparison, because it decides who the broker answers to. You remain the client, so you are the person entitled to statements, to the complaint process and to any protection attached to the entity holding the money, which is set out in how client money is held. Read-only access is the tool that lets you watch without being able to trade, and it is explained in read-only access to an account.

Two questions settle most of the risk in the document: what exactly is excluded from the authority, and how you revoke it and on what notice.

How Each System Splits One Trade

The allocation method is where the structures visibly differ, and each rule distributes a different thing.

LAMM is the older variant of the allocated family, distributing by lots rather than by equity, so a large and a small account receive the same trade size unless the rule scales it. That is why an allocation basis stated as lots and one stated as a proportion of equity behave differently on the same order.

What Changes When You Ask for Your Money Back

This is the question nobody in the comparison literature raises, and it is the one that decides how the arrangement feels when something goes wrong.

On an allocated account, a withdrawal is what it looks like. The money is in an account in your name, the positions attributed to you are there, and the request runs through the broker’s normal process.

On a pooled account it is a redemption. Your share has to be valued before anything can be paid, so the request is processed at a valuation or rollover point the broker and the manager have defined rather than immediately, and open positions may need to be handled first. Your exit also changes the percentages every remaining investor holds, which is why pooled arrangements set redemption windows at all.

Two things are therefore worth establishing in writing before depositing: when a redemption is priced, and whether a notice period applies. Neither is a detail. They decide how long your money is not yours to move. How drawdown is measured while you wait is covered in how drawdown is measured.

The High Water Mark and What It Rewards

A performance fee is normally charged only on new profit, measured against the highest equity the account has previously reached. That level is the high water mark, and after a loss no performance fee is due until the account climbs back above it.

Presented as investor protection, it is genuinely that: it stops the same profit being charged for twice.

The incentive it creates is rarely stated, and it deserves to be. A manager sitting below the mark earns nothing from the recovery until the old peak is passed. A slow, cautious recovery pays that manager the same as no recovery at all, while a fast one restores the fee. The structure therefore pays least for exactly the caution an investor most wants after a loss.

That is not an accusation about any particular manager. It is a property of the arithmetic, and it is a reason to ask how a manager behaved after their worst drawdown rather than what their headline return is.

What the Inducement Rules Say About a Manager Taking a Rebate

Not one of the pages that rank for this comparison cites a regulator. The rules are specific, and they bear directly on how a manager is paid.

The FCA Handbook sets a general prohibition in its conduct of business rules on inducements: unless an exemption applies, fees, commissions and non-monetary benefits may not move in either direction between a firm and anyone who is not its client, where that is connected to an investment or ancillary service. A firm that breaches it is regarded as failing its obligations on conflicts of interest and on acting in its clients’ best interests.

Portfolio management is then treated more strictly than the general rule. Where the firm is providing portfolio management to a UK retail client, it is barred from taking any fee, commission or benefit, monetary or otherwise, that reaches it from a third party or from anyone acting on that party’s behalf in connection with the service. The exceptions are narrow: acceptable minor non-monetary benefits, and third-party research received under the separate research rules.

Running a managed account is portfolio management. A volume rebate paid to the manager by the broker is a third-party benefit connected to that service, so it sits inside the prohibition rather than beside it.

There is also a line worth knowing that no comparison page draws. Where the client is a retail client based outside the UK, or a professional client, the same Handbook frames the bar as accepting and retaining rather than as accepting at all, and that is a different test.

The usable form of all this is a question. Ask a manager whether they receive anything from the broker based on the volume they trade in your account, and ask which regulated entity the arrangement sits under. A manager who cannot answer both has told you something.

Where Copy Trading Ends and a Managed Account Begins

The two are routinely presented as points on one scale. They are different relationships.

Copying replicates a signal into an account you continue to control: you can stop the copying, close a copied position and change the size. A managed account transfers trading authority over the account itself through the power of attorney described above, and the investor is not expected to intervene.

How copy trading providers are chosen and how copy fees are charged belong to copy trading and how it differs and to the social trading guide on this site, and this page does not repeat them. The distinction that matters here is authority: who is allowed to act on the account, and whether you can take that permission back today or on notice.

Who Should Not Open a Managed Account

Anyone who cannot afford the loss. Handing trading authority to a third party removes your ability to intervene at the moment you would most want to, and none of these structures reduces market risk.

Anyone choosing on the strength of a published track record alone, without knowing the entity, the regulator and the terms of the authority. Account types and the terms attached to them are covered in account types and their terms.

Anyone who needs access to the money at short notice, particularly in a pooled arrangement where a redemption is priced at a defined point rather than on request.

And anyone who would not be comfortable watching a position they cannot close. On a pooled structure that is not a risk to manage but the definition of the arrangement.

Frequently Asked Questions