Referred by a partnering fund manager, three investors join TenTrade and open their individual PAMM accounts to be managed by the same fund manager.
Their funds are then pooled into a single PAMM account.
The investors fund their PAMM accounts as follows:
Investor A: $2,000
Investor B: $3,000
Investor C: $5,000
Total pooled funds: $10,000.
The fund manager trades this amount and the PAMM account receives 10% trading profit, which comes to $1,000.
Each investor receives a share of the $1,000 profit based on their percentage of the total pool:
Investor A invested $2,000 of the pool → 20%
20% of $1,000 = $200
Investor B invested $3,000 of the pool → 30%
30% of $1,000 = $300
Investor C invested $5,000 of the pool → 50%
50% of $1,000 = $500
Let’s say the fund manager charges a 20% performance fee on profits. That means each investor pays 20% of their profits to the manager as a performance fee.
Investor A: $200 profit → $40 fee → keeps $160
Investor B: $300 profit → $60 fee → keeps $240
Investor C: $500 profit → $100 fee → keeps $400
The fund manager gains $200 in performance fees.