Forex fund management is the process of managing foreign currency accounts and trading the markets on behalf of clients.
By engaging a forex fund management team, it provides a number of benefits to investors particularly because money managers in general make more money than individual retail investors.
Forex trading is a difficult activity to become skilled at and create profit on a consistent basis and the majority of newbie traders will blow their accounts within a few months.
It is not only newbie retail traders that lose their funds however. If an investor chooses to go down the funds management route, account managers can lose a client’s funds if the client hasn’t chosen a reputable company by not conducting their thorough due diligence.
This issue with locating a trustworthy money manager that generates a good, consistent profit, is that it can be quite a difficult undertaking to complete. However, if you can uncover one, it is well worth the exertion.
What are the benefits of forex fund management?
One of the main benefits of employing a fund manager is that clients don’t need to invest huge amounts of money to get started although one of the problems is that investors still believe that they will need to put in hundreds of thousands of dollars or pounds. It is true that some of the best managed accounts are specifically for high net with investors and do still require this starting amount and some funds are by invitation only.
It is also true that nowadays, the majority of managed funds only require a minimum starting amount of five or ten thousand dollars.
Another benefit is that investors have full and total control of their accounts and can withdraw and add funds, and can also close their account when they want, as long as no trading positions are open.
Because more and more people are looking to the foreign currency exchange marketplace to add an extra asset class to their portfolios, a forex fund manager is becoming an increasingly wanted resource. They are sought after because investors believe that they will make them substantial gains.
Forex fund management services make their money by charging clients a percentage of the profits that they create on their accounts (performance fees), so long as the profits are above the high water mark, which is the highest amount that an account has ever reached.
As an example, if you have £10,000 invested in a fund and during the month the team makes 10% profit and the performance fee was 25%, the profit would be £1,000 and the manager would take £250 as their fee, leaving £750 clear profit for the investor.
Performance fees vary from manager to manager. Typically they are 25%, some as low as 15%, and up to 50%, some more than this. It may seem fairly high but without a management team trading for you, it is highly likely that you would lose your money.
Don’t be put off by the higher performance fee though. Each fund should be scrutinised on an individual basis. Some providers that charge a higher performance fees may generate huge profits, so take each one on its merits.
If the client makes no profit, then the fund managers make no profit either.
Always, always, always conduct thorough due diligence on each provider. Check to see if they are regulated, such as the FCA for example. Check that the broker is regulated. Check that they have 3rd party independently audited accounts. Check their trading records, the longer time frame with profits the better, minimum of two years. Phone them up and talk to them.
Going through this process of due diligence will virtually eliminate the chances of you being sucked in by a scam.
Bear in mind that although profits have been great for the last three years or so, future profits can fall as the markets are constantly changing. This can be overcome by finding a forex fund management team that has an array of accounts at their disposal, so that if one account starts to drop off, your fund can be switched to another that is more profitable.