When Investors Look for Exceptional Managed Accounts…

They come to The Managed Account Review.

Why? Because investors know that we’ve taken the time to select a very small percent of managed forex and managed futures accounts which we believe will outperform the markets.
We publish the information you need to know in order to make the best investment decisions.

Why We Like Managed Accounts

The graph tells the story. Over the past thirty years, CTA Managed Accounts have performed far better than the top 500 equities in the S&P index.

What We Do

The Managed Account Review selects a handful of high-performing managed forex and managed futures accounts and publishes their analyses and reviews so that you can discover those we believe have merit.

Managed Forex and Managed Futures

The Managed Account Review focuses exclusively on these two types of accounts. We don’t promote brokers or trading systems or signal providers. Managed Forex, and Managed Futures accounts offer investors the ability to diversify without having to learn to trade.

How We Do Our Work

Before we list any managed account in The Review, we select only those which meet specific criteria for growth and risk management. Then we speak personally to the account managers and traders. We ask for proof of performance, and evidence that the manager is properly registered. We check with the official registrars, such as the F.S.A. or the N.F.A. and look for any records of complaints or disciplinary action.
If we find problems, we simply don’t list the manager.

The Requirements

Regulated managers must disclose the performance of every managed account ALL of their trading history in a Disclosure Document (D-Doc).
The D-Doc is a standardized presentation, subject to audit by the NFA, which MUST disclose a CTA’s entire history of managed accounts. This means losing programs as well as winners. CTAs cannot “reinvent” themselves under a different name after a failed program. They must submit reports to their regulators. They are subject to random audits. If they are caught misrepresenting their records or their history, they are subject to severe penalties. AND their disciplinary records are public.

Enjoying Success With A Managed Account

Success with a managed forex or managed futures account is not necessarily measured by return on investment. Success means (a) that you receive the highest possible return with the lowest amount of risk and (b) that you receive these returns consistently, with low volatility. Risk management is key to success. Any program which lists yields of more than about 20% cannot mathematically do so without a higher degree of risk than one would find in dividend-yielding stocks, or annuities. Therefore it is prudent to allocate only a small portion of your investment portfolio in the accounts described here. Success in managed forex and managed futures investing will always take risk into account.

“what is a managed account? it is simply your own brokerage account, traded by a professional.”

What is a Managed Account?

The phrase “managed account” can be foreign and vague, unless you know specifically what it means in context. For our purposes, and for the purposes of the accounts discussed in The Review, a Managed Account is a trading account opened at a forex or commodities broker, in your name, or in a name you designate (such as a trust or IRA), and which you have given a professional manager the authority to trade on your behalf.
The process of opening an account depends on the manager you choose. Some will direct you to a set of account-opening forms which already have their codes or ID’s filled in, whereas other managers will direct you to the standard account-opening forms provided by the broker. Among these forms will be a Limited Power of Attorney, or LPOA. Sometimes the LPOA will be delivered to you AFTER your account is opened. This is normal. The LPOA grants the manager limited powers and authority to make trades on your behalf. It does NOT give the manager access to your own password or to your funds. All the manager can do with your LPOA is make trades (which, after all, is the only activity to which you entrust the manager).
Once the manager has the LPOA, he or she begins the process of managing your account. In this context, “managing” means trading.
During the time you have the managed account, you can add or withdraw funds. However, since at many times the managed forex or managed futures account will have open trades, there may be specific days or times of day when the broker can “close out” your trades and release your funds for withdrawal. Every broker has rules regarding withdrawals, so you should check on these rules when you first open the accounts.
Additionally, you have the power to withdraw the LPOA. This effectively stops the trader from making trades on your behalf. You are free to use this power, but once it’s done, it’s done. Don’t open a managed account expecting movement only in one direction. Balances invariably go up and down for short periods during the longer climb toward wealth.

A Briefer Answer to What is a Managed Account?

It is simply an account which you own under a name or entity you designate, traded by a professional manager of your choice.

Growth of The Managed Account Sector

In the past five years, the marketplace has significantly increased its acceptance of the managed account structure as a preferred investment method. As of March 2011, hedge funds alone now allocate about $58 billion to managed accounts, up 27% from the last 12 months.
Part of this growth is due to increasingly sophisticated software which allows account managers to tailor their portfolios to specific investors’ criteria. Transparency is of paramount importance. A Managed Account allows an investor to “look over the shoulder” of traders so that they can view their accounts, trades and positions in real-time.
While managed futures accounts have long fallen under the jurisdiction of the CTFC, managed forex accounts for the most part could be offered and traded by anyone who cared to put up a website and published some numbers.
Fortunately, the regulatory environment has changed, and now in the US, anyone offering a managed forex account must register with the CFTC and become a member of the National Futures Association.

Types of Managed Account

The Managed Forex Account

Currency trading is a difficult task. Some estimates indicate that about 90% of investors who trade forex for themselves lose their money within the first six months. Often, investors will follow a pattern as they learn about the currency markets:

1. They try to trade for themselves…. and lose most of their account balance.

2. They try forex signal services… and discover that the signals don’t match real-life results. Or that they miss some signals. Or that the signals come at awkward times. Or that some signals lead you to carry losing positions for a very long time.

3. They try “EAs” (also known as trading robots)… and discover that the technical requirements are quite tenuous, even with the use of a Virtual Private Server. Everything has to work all the time, consistently, simply for the software to function properly. Then when it does, the EA fails to produce results remotely close to those promised on the fancy web page which sold them the EA.

4. They try mirror-trading… and discover that the trader they are “copying” opens an impossible number of positions at once, or carries losing trades to such an extent that the investor gets margined out. Or that from the moment they sign on, the performance is disappointing.

5. They try a “not completely honest” managed account service. They don’t know that the manager operated under a different name in the past, and after losing everyone’s money, closed shop, then re-opened under a different name, conveniently showing track records which skip over, or inaccurately reflect past results. They may even publish audited results. But what has been audited? By definition a managed account belongs to a single entity. How does the auditor know which account(s) he’s auditing? What rules are followed? (There are established standards for auditing managed accounts). An unregulated manager has too many ways to show you only what is best for the manager. Don’t put your money with one!

6. The finally turn their account over to a regulated professional such as a CTA. At last, the investors have learned what to avoid. And, what to look for: an account manager who is regulated, who is subject to random audits by a third party, who has a great deal to lose if (s)he is caught misprepresenting (or hiding) a track record. All US regulated managers must follow strict, uniform guidelines which allows investors to compare “apples to apples” when looking at disclosure documents. If you want to open a managed account, do so with a regulated professional!

The Managed Futures Account

The Managed Futures Account is somewhat more mainstream than the managed forex account, primarily because futures are traded on exchanges, whereas there is no exchange for spot forex trading. Their history is longer, and you’ll find more CTAs who specialize in managed futures than those who favor managed forex. The key features of the futures managed account are:

1. Diversification. By allocating one’s portfolio across a number of asset classes, risk is diminished, and therefore on the long term, returns are higher. If you had invested $100,000 in the S&P Index in 1990, it would have grown to about $216,000 in 2010. Had you invested $100,000 in Managed Futures, your account would have grown to over $600,000. In other words three times higher.

2. You are up when the market is down. Traditionally, Managed Futures earn money when the stock market declines. This is because Managed Futures advisors can employ strategies to take advantage of declining prices. These strategies include short-selling, and specific options techniques.

3. Due to regulation and standardization within the industry, Managed Futures are considered institutional-grade investments. Many pension funds, for example, invest in Managed Futures in order to beef up returns and stabilize risk.

4. Any kind of investment which is traded electronically is subject to system failure. The largest clearing exchange in the world, CME , employs robust, time-tested practices so that it operates smoothly during turbulent markets. CME has never defaulted in its 100 year + history.

The typical Futures Managed Account has offered quite consistent returns for over thirty years. For those who have the resources to invest, this is an investment worth considering.

Important Note: A Managed Account is Not For Everyone

Most managed account providers structure their investments for institutional investors. Investment minimums are commonly $1 million and more. However some managers offer accounts for retail investors. The Review is aware of some CTAs who have allowed investments as low as $3,000. Such small minimums demand extreme caution, both by the investor and the manager.
Retail investors should look carefully and honestly at their own finances before committing to a managed account. Due to the fact that most managed account programs trade volatile assets such as forex and futures, account balances will reflect that volatility, often magnified three or tenfold due to the leverage offered by the broker.
For this reason it is absolutely imperative that retail investors ONLY work with registered, regulated professionals. In the US, this means that your account manager must be registered with the CFTC and members of the NFA. In Western Europe this means registration with the F.S.A. or POLYREG.
Retail investors should never invest with money managers who aren’t members of these bodies. So-called “managed accounts” can still be found on the internet, most of them promising extraordinarily high returns, with small minimum investments. These are the ones to stay away from, no matter how slick the site may look. The Review will publish a list of non-regulated account managers. We advise to stay away from these firms.

“Our mission is to provide accurate, important and educational information on managed account providers.”

The principal purpose of The Managed Account Review is to provide sober, honest educational articles covering alternative investments. If you have a question which isn’t answered in our pages, you can ask us and we’ll publish your answer (with editorial discretion).

Impartial Analysis We do not promote our own programs or any specific managed account. We publish the rankings and reviews of managed account providers and programs.

¹The method of charting used in the analysis at the top of this page is known as the Value-Added Monthly Index (VAMI). It allows investors to make a “direct” comparison of one type of asset to another. The VAMI is quite useful when comparing a managed account to any standard index.