Research Note / Structures
Trade-Only LPOA Managed Accounts: What the Authority Covers and What It Does Not
What a trade-only limited power of attorney permits and forbids, who holds custody, and what allocators should confirm in the account documents.
- Focus
- Trade-only limited power of attorney managed account
- Audience
- Professional investors, allocators, family offices
A trade-only limited power of attorney managed account is a segregated brokerage account opened in the investor's own name, where the manager's authority is limited to placing trades. The manager cannot withdraw, transfer or encumber capital, and custody stays with the prime broker or custodian.
That description is only as good as the paper behind it. The words of the limited power of attorney (LPOA), the investment management agreement (IMA) and the broker's own account terms decide what a manager can actually do, so an allocator should read all three.
What does a trade-only LPOA permit, and what does it forbid?
A trade-only LPOA lets the manager execute trades in the investor's account to an agreed mandate. The same document should leave everything else with the investor. Qlumina describes the authority it receives in these terms: on its investor guide, the LPOA is for trading execution only and is executed alongside the Investment Management Agreement during onboarding, while the investor holds direct legal and beneficial ownership of the assets in a segregated brokerage account.
Permitted
- Send, amend and cancel orders in the account
- Manage open positions and close them
- Act within the restrictions and risk limits the mandate sets
Forbidden
- Withdraw cash or securities
- Transfer assets to any other account
- Pledge or otherwise encumber capital
- Change the registered owner or the funding instructions
The three prohibited verbs do separate work, and a document that leaves one of them open is a different product from a trade-only mandate, whatever its title says.
Withdraw
The manager cannot instruct cash or securities to leave the account to any destination.
Transfer
The manager cannot move assets to another account, including one in the manager's own name.
Encumber
The manager cannot pledge the assets as collateral for obligations the investor did not agree to.
Qlumina's note on the evolution of institutional capital states the standard directly: the authority is restricted to trade execution within pre-agreed risk boundaries, with no legal authority to withdraw, transfer or encumber investor capital.
Who holds custody?
The prime broker or custodian holds the assets, in the investor's name. The manager does not. Qlumina describes itself as not a prime broker and as not taking custody of funds, and says the manager should never take custody of funds.
The investor funds the account directly. Qlumina says the institution is selected in consultation with the investor, and its research names Clear Street and Interactive Brokers among the custodians used for segregated accounts. Which institution applies to a given program should be confirmed in the program documents, not assumed from an example.
Custody does not remove counterparty risk. It moves it. The risk becomes distress at the prime broker or custodian, so an allocator should know which institution holds the assets and under what terms.
How does it differ from discretionary custody or a pooled fund?
Three arrangements are often confused. In a pooled fund, assets sit in a vehicle that owns the positions. In a discretionary arrangement with custody, the manager (or an affiliate) holds or controls the assets. In a trade-only LPOA account, the broker holds the assets in the investor's name and the manager only trades.
| Feature | Trade-only LPOA SMA | Discretionary with manager custody | Pooled fund |
|---|---|---|---|
| Who owns the assets | Investor, in own name | Depends on documents; control sits with manager | The fund vehicle |
| Who holds custody | Prime broker or custodian | Manager or affiliate | Fund's custodian or prime broker, under fund documents |
| Manager authority | Trading only | Broader, as granted | Set by constitutional documents |
| Commingling | None | Depends on documents | Yes, by design |
| Reporting | Real-time broker access, daily statements | Set by manager | Periodic, commonly monthly or quarterly |
| Ending the relationship | Investor revokes authority or ends the mandate | Per agreement | Redemption, subject to notice, lock-ups and gates |
The discretionary-custody column is a general description of the arrangement, not a statement about any specific provider, and it should be completed from the actual agreement in any real comparison.
One trade-off belongs in the picture. Pooled vehicles can reduce collateral through cross-strategy netting, while separate accounts can require more aggregate collateral. Segregation has a capital efficiency cost that a pooled structure can sometimes avoid.
How does revocation work?
The investor can revoke the LPOA, and trading stops. Qlumina's evolution note says revocation halts trading immediately, and describes the allocator as holding ultimate authority. The important point is that revocation is done with the broker, not by asking the manager for permission.
Some brokers also support account-level risk triggers. Whether such a control is available depends on the broker and the account terms, so confirm it in writing before relying on it.
Which document controls what?
No single document tells the whole story. The LPOA fixes what the manager may do to the account. The IMA fixes the commercial relationship. The broker's terms fix what happens to the account itself. Where they disagree, the order of precedence decides.
| Document | What it settles |
|---|---|
| Limited power of attorney | The scope of the manager's authority over the account: trading only, and what is excluded. |
| Investment management agreement | The mandate, restrictions, fees, term and termination rights between investor and manager. |
| Broker account and margin terms | Margin, financing, liquidation rights and data access. These sit with the broker, not in the LPOA. |
| Fee schedule | Where each fee sits and who collects it. Obtain it from the source documents. |
Reading the LPOA wording clause by clause
Most of the protection sits in a handful of clauses. The table lists what each should say and what a careful reader treats as a flag. It is a reading guide, not legal advice, and the actual documents should be reviewed by the investor's own counsel.
| Clause | What it should say | What to flag |
|---|---|---|
| Grant of authority | Authority to place orders in the account, limited to trading in the instruments the mandate allows. | Wording that grants authority 'over the account' or 'over the assets' without limiting it to trading. |
| Exclusions | An explicit statement that the manager may not withdraw, transfer or encumber assets. | No exclusion at all, or an exclusion that carries exceptions for the manager's own fees without a stated procedure. |
| Fee payments | A defined mechanism, set out in the agreements, for any fees paid from the account. | Open-ended authority to debit the account for amounts the investor has not approved. |
| Revocation | A right for the investor to revoke at any time, effective on notice to the broker. | A notice period, a consent requirement or a condition that delays revocation. |
| Term and termination | Consistency with the IMA on how and when the relationship ends. | Termination rights in the IMA that contradict the revocation right in the LPOA. |
| Reporting and data | Investor access to the account directly at the broker, independent of the manager's own reports. | Reporting that runs only through the manager. |
What should an allocator confirm in the documents?
Use this checklist when reviewing an LPOA managed account before funding.
- 01Account title. The account is in the investor's legal name, and the investor funds it directly.
- 02Custodian identity. The prime broker or custodian is named, regulated, and independent of the manager.
- 03LPOA scope. The wording grants trading execution only, and expressly excludes withdrawal, transfer and encumbrance of capital.
- 04Order of precedence. Read the LPOA with the IMA, and confirm that the IMA does not grant powers the LPOA withholds, or the reverse.
- 05Revocation mechanics. Confirm how the investor revokes, whether the manager's consent is needed (it should not be), and how fast the broker acts.
- 06Open positions on revocation. Confirm who closes positions, at whose cost, and under what instructions.
- 07Financing and margin terms. Read the broker's margin, financing and liquidation rights, which sit in the broker's terms rather than the LPOA.
- 08Data access. Confirm real-time access to tickets, cash balances and margin metrics, plus daily statements, at the broker.
- 09Fees. Obtain the fee schedule from the source documents and confirm where each fee sits and who collects it.
- 10Regulatory status. Ask for the manager's regulatory approval in writing and check it with the relevant authority.
Qlumina's own recommendation is simple: ask to see the LPOA wording alongside the IMA. Its investor guide sets out the onboarding sequence, and the program catalog shows how individual programs are described.
What does the structure not protect against?
It also does not remove broker risk, operational error, or the risk that the manager's execution differs from what the investor expected. The investor still needs to read the mandate, set limits, and watch the account. Qlumina frames an SMA as a delivery format, not a strategy or a guarantee.
Where do managed accounts sit in the wider market?
Managed accounts are one answer to a question allocators have been asking about pooled offshore vehicles: who owns the assets, who can move them, and how fast can the relationship end. For readers comparing the managed-account route with other wrappers, the sibling note on the Swiss actively managed certificate covers a securitized alternative. Further reading is collected in Insights.
Frequently asked questions
Can the manager withdraw money from a trade-only LPOA account?
No, not under a properly drafted trade-only LPOA. The authority covers trading execution only, and it should exclude withdrawing, transferring or encumbering capital. Confirm the exclusion in the wording rather than relying on a description.
Who holds the assets in a managed account?
The prime broker or custodian holds them, in the investor's own name. The manager does not take custody. The investor funds the account directly and has access through the broker.
How does an investor stop the manager trading?
The investor revokes the LPOA with the broker, which halts trading. Qlumina describes this as electronic and without lock-ups or redemption penalties. The investor should agree in advance who closes any open positions.
Is a managed account safer than a pooled fund?
It is different, not automatically safer. A managed account avoids commingling and gives direct ownership and real-time visibility, but it carries broker counterparty risk and strategy risk. A pooled fund may offer margin efficiency through netting that separate accounts can lack.
What documents should an allocator read?
At least the LPOA, the investment management agreement, the broker's account and margin terms, and the fee schedule. Read them together, because the precedence between them decides what the manager can do. Qlumina recommends reviewing the LPOA wording alongside the IMA.
Risk and eligibility
This note is educational only. It is not an offer or solicitation, and it is directed at professional investors only. Trading involves substantial risk of loss, including loss of the full amount invested, and past performance is no guarantee of future results. Qlumina is a BVI FSC approved investment manager. Eligibility and the terms of any program are set out in the program documents, which prevail over this note.
Separately managed accounts
See How Programs Are Delivered as SMAs
Each program in the catalog is described in separately managed account format. The investor guide sets out custody, authority and onboarding.
Research notes are published for professional readers. Not an offer or solicitation. Risk disclosure
