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11) What is notional funding?

Notional funding enables qualified investors to invest in a CTA program at a lower minimum by using increased leverage. For example, for an account with a minimum of $100,000, an investor may want to fund the account with $50,000 of actual funds and $50,000 of notional funds. In that instance, the notional value of the account is $50,000 and the nominal value is $100,000 (nominal – notional = actual). This means that the account has $50,000 of actual client assets but will be leveraged to trade like a fully funded, $100,000 account. The same volume and number of trades placed in a fully funded account ($100,000) will be employed in the notionally funded account ($50,000), thus increasing the margin/equity ratio. It is important to note that the degree of risk increases proportionately when leverage is used. In the case mentioned above, the profits and losses of the notionally funded investor would be magnified by two. If an account fully funded at $100,000 experienced a 2% profit or loss, then an account notionally funded at $50,000 would experience a 4% profit or loss. Notional accounts are normally reserved for those clients who qualify and meet certain investor requirements. The Notional Account Agreement can usually be found in the Disclosure Document or will be provided upon request to the CTA. It is essential that the client read and be made aware of the risks and increased leverage involved in notionally funded accounts. Keep in mind 4 that with notionally funded accounts, the advisor will earn fees off the nominal amount (nominal = actual + notional; in this case, $100,000).

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Past performance is not necessarily indicative of future results. Trading commodity futures, options, and foreign exchange ("forex") involves substantial risk of loss and is not suitable for all investors. In no way is the advisor of the month a direct recommendation of aiSource or any of its affiliates. Please carefully review the disclosure documents and any other promotional material prior to investing with any program. Managed accounts and/or managed futures are very risky and may not be suitable for all investors. Please consult with a Managed Futures specialists prior to investing.