A manager places one order for four lots. Behind that order sit forty investors with balances from 500 to 90,000 units of account currency. Something has to decide how much of that position each of them owns, how the result is split, and what happens when one of them withdraws on Wednesday afternoon. PAMM and MAM are two answers to that problem, built on different plumbing.
The names come from the software. PAMM stands for percentage allocation management module, MAM for multi account manager, and LAMM for lot allocation management module. Marketing departments use them loosely, so the label on a broker's page is less informative than the mechanism underneath.
One pot or many
In a PAMM, investor money is pooled into a single trading account. Each investor holds a percentage of the pool, calculated when they join and recalculated as money enters and leaves. The manager trades the pool. Profit and loss accrue to the pool, and every investor's balance moves by the same percentage on the same day.
In a MAM, each investor keeps their own trading account with their own balance. The manager trades a master account and the platform allocates a corresponding position into each linked account. Nothing is pooled, so an investor can, depending on the setup, apply a multiplier to reduce the size taken or set their own equity stop.
| PAMM | MAM | Copy trading | |
|---|---|---|---|
| Where money sits | One pooled account | Individual accounts | Individual accounts |
| Investor control | Join and exit at set points | Multiplier and personal limits possible | Full control, can close any trade |
| Result across investors | Identical in percentage terms | Close, with small execution differences | Varies with balance and settings |
| Usual fee model | Performance fee at rollover | Performance fee, sometimes per lot | Subscription or per lot rebate |
The retail end of this sits in copy trading and signal providers, where the follower keeps control and can override anything. The technology that moves the orders is the same family described in trade copiers. What separates PAMM and MAM from copying is discretion: the manager decides, and the investor's role ends at the allocation.
How allocation actually works
MAM platforms usually offer several allocation methods and the choice matters more than most investors realise.
Proportional by equity is the common default: each account receives a share of the master position matching its share of total equity. Proportional by balance uses balance rather than equity, which behaves differently once positions are open. Lot allocation assigns a fixed number of lots per account regardless of size, which suits a manager running a small number of similar accounts and produces wildly different risk percentages if the balances differ. Percentage allocation lets the manager set a fixed share per account by hand.
Rounding is where the theory meets the minimum lot step. An account too small to take a proportional share of a position either gets rounded up, taking more risk than intended, rounded down, taking none, or skipped entirely. Any manager running accounts across a wide size range should know which of those the platform does, because the smallest accounts are the ones that end up with results that do not match the published record.
Past results of a managed account describe what happened, not what will happen. Trading with leverage is high risk and a managed structure removes your ability to intervene, which concentrates that risk in one person's decisions. Any allocation should be money you can afford to lose in full.
Fees, high water marks and rollover
The standard arrangement is a performance fee taken as a share of new profit, sometimes with a management fee on assets and sometimes with a per lot fee paid by the broker. The mechanism that protects the investor is the high water mark: the highest value on which a performance fee has already been charged. Below that level, no further performance fee is due, so an investor does not pay twice for recovering the same ground.
Read how the mark is defined. Some agreements reset it annually, which means a drawdown in December can be forgotten in January. Some reset on withdrawal. Some apply the fee at each rollover period, which might be monthly, weekly or daily, and a shorter period charges more often on a volatile equity curve even when the annual result is identical.
PAMM structures also define rollover points for joining and leaving. Money added mid period may sit uninvested until the next rollover, and an exit request may only execute at the following one. That is not a fault, it is how the percentage accounting stays consistent, but an investor expecting same day liquidity will be unhappy.
The regulatory question nobody asks first
Trading someone else's money on a discretionary basis is a regulated activity in most serious jurisdictions, and charging a share of profits does not create an exemption. Managers operate legitimately in several ways: with their own permission, as an appointed representative of a licensed firm, or in a jurisdiction with a lighter regime and a client base that it covers.
What an investor should do is check, on the regulator's own register, that the entity taking the money holds a permission that covers managing investments. A broker's PAMM page is not evidence of that, since the broker is providing the account infrastructure rather than vouching for the manager. The difference between a listing and a permission is exactly the trap described in licence versus registration.
What to check before allocating
Look at the drawdown history, not the return. A manager who returned a strong number through a 40 percent equity decline is running a risk profile most investors would not accept if it were stated as a number, which is why drawdown is the first metric to read. Ask how position size is set, and whether the answer resembles the fixed percentage discipline in risk management rules or moves around with conviction.
Ask for a verified record covering a period that includes a bad month. Ask what happens to open positions if you request an exit. Ask who holds the money: in a PAMM, the pooled account is at a broker, and the broker's own standing matters as much as the manager's. And read the limited power of attorney you are signing, because that document, rather than the marketing page, defines what the manager is permitted to do with the balance.
"Everyone asks the manager about returns. The question that tells you more is what their worst month looked like and what they did on the Monday after it."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- A PAMM pools money and tracks percentage shares; a MAM keeps separate accounts and allocates each trade into them.
- The allocation method and the lot rounding rule decide whether small accounts get the result the master account shows.
- The high water mark definition, the reset conditions and the rollover frequency change the real cost of a performance fee more than the headline percentage does.
- Discretionary management of third party money normally needs a permission; check the manager's entity on the regulator's register, not on the broker's page.
Frequently Asked Questions
What is the difference between a PAMM and a MAM account?
A PAMM pools investor money into a single trading account and tracks each investor as a percentage share of that pool, so everyone experiences the same result proportionally. A MAM keeps each investor in their own account and copies the manager's trades into it using an allocation method, which allows per investor settings such as a different risk multiplier or an individual stop.
What is a high water mark on a performance fee?
It is the highest account value on which a performance fee has already been charged. Until the account climbs back above that level, no further performance fee is due, which prevents an investor paying twice for recovering the same ground after a loss. Contracts differ on whether the mark resets after a period or after a withdrawal, so the definition is worth reading in the agreement.
Do you need a licence to manage other people's money?
In most regulated jurisdictions, trading on a discretionary basis for third parties is a regulated activity that requires a specific permission, and taking a share of the profits does not change that. Some managers operate under an exemption, under a licensed firm's umbrella or in a jurisdiction with a lighter regime. An investor should check the manager's permission on the regulator's own register before allocating.