Managed Account Fee Structures?

[daedalus 10]

I've been approached by 5 people over the past month to take on capital from them and trade it in line with my account in a managed account fashion mainly in the FX markets. Its a great opportunity for me because it would allow me access to capital I don't have in my personal accounts, and thus the opportunity to supercharge my own account growth along with my clients.

 

And while thats all well and good but I don't quite know what I should be charging these people in terms of management fees, profit sharing, etc...

 

Does anyone manage money in here or have experience paying others to do so? I've heard of people charging either high mgmt fees, and 25% profit sharing, and others skipping the mgmt fees all together and just charging upwards of 60% of profits...

 

For example, my mentor uses this for his managed money structure:

 

There are no fees or costs involved other than pure profit share. Management fees are 25% from each new peak equity mark calculated and debited at end of each calendar month beginning Nov 30th. There are no additional fees (other than standard trade execution costs via brokerage) from the management side here. Peak equity marks will always begin from the initial balance start or highest profit reached of any managed account, current or historical.

 

I'm leaning towards no fees, and just a straight % based profit factor.

 

Anyone got any info or experience to share? Thanks for your help!

 

I didn't know where to stick this thread... didn't really seem to fit anywhere on the forums, so if it should be moved elsewhere sorry in advance!

[brownsfan019 17]

"Standard" (in futures at least) is 20% profit share and 2% management free or 25% profit share and 0% management fee. That's a fairly straightforward way of doing it but there are always exceptions to the rule. If you are good and have a track record, people will pay more. Initially though it sounds like a 20/2 or 25/0 could work or even lower depending on how aggressive you want to get in the funds raising. Odds are these 5 people know others that could invest so keep that in mind. If your goal is to raise more and more funds, make them money and keep the fees reasonable IMO.

[daedalus 10]

Thanks for the quick reply brownsfan!

 

Thats exactly what I wanted to know. I'm not really looking to take on a huge list of clients, or really even expand beyond these 5 right now. It looks like then I would be focusing on straight 25% with no fees... if i'm not making them money, i shouldn't be charging them anything!

 

Thanks again!

[MHJ 10]

I am not a fan of investment deals that come with large fees. However, there is no way to avoid them at times.

[sevensa 10]

I am not a fan of investment deals that come with large fees. However, there is no way to avoid them at times.

 

Uhm... ok, thanks for sharing, but how does this addresses daedalus' question?