Been looking at some PAMM accounts with decent track records but the performance fees vary wildly.
Some charge 20%, others go up to 50%. How do you actually calculate what you’ll net after fees when the returns fluctuate monthly?
Simple math. PAMM makes 10%, charges 30% performance fee - you’re left with 7% net. Always check fees first.
Managers charging 50% better be crushing it every time.
Track yearly net after fees not monthly numbers
Consider the breakeven point. A manager with a 30% performance fee needs to outperform the market by 8-10% per year to match basic index funds after fees. For instance, if Manager A has 20% returns but takes 40% in fees, your return is only 12%. Manager B makes 15% and charges 20%, so you still get 12%. Look beyond just percentages. Consistency is key. Be cautious of high water marks and loss carryforward rules, as these affect how managers handle fees after losses.
Got burned by a PAMM with 45% fees - learned this lesson the expensive way.
Skip the monthly returns hype. What matters is what you actually keep after a full year. Take their average annual return, subtract performance fees from winning months, and see what’s left.
Here’s my stress test: I take their worst drawdown and multiply by 1.5. Had a 15% drop? I prepare for 22%.
Watch for managers who frontload good performance early then coast. They’ll crush January, take fees on those gains, then you’re flat by December while they’ve already cashed out.
Don’t pay over 30% fees unless they’re consistently hitting 20%+ annual returns. The math doesn’t work otherwise.
It’s straightforward. You only pay the performance fee when the PAMM manager generates profits for the month.
For example, if they gain 10% with a 30% fee, you’ll end up with 7%.
In months with losses, there’s no fee applied.
I recommend checking their average returns over the full year to understand the overall performance better.