Managed accounts are brokerage accounts, held by a brokerage firm that is also registered as a futures commission merchant (FCM), in which investment discretion has been assigned to the CTA manager. The investor is responsible for opening and maintaining the account; reconciling brokerage statements and maintaining cash controls; and negotiating contracts with managers, including investment management agreements and powers of attorney. The limited power of attorney gives the manager authority to trade on the investor's behalf, but the money has to remain in the investor's account. The investor controls the terms of the power of attorney, including the right to revoke trading privileges.

The key advantage to a managed account is complete control. By pulling trading privileges, the investor has the ability to manage the cash and liquidate the account at any time. Managed accounts, then, avoid the lockup provisions frequently found in hedge fund investments. In theory, this gives the investor better than daily liquidity, as the account can be liquidated whenever the market is open. That alone is enough to make some investors demand managed accounts, especially investors with in-house staff to handle the paperwork.

Managed accounts have other advantages. The money is in the investor's control, not the fund manager's, at all times. The accounts offer complete transparency. The investor can see the positions, trades, and details at any time. Managed accounts, then, ...

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