  The electronic structure and magnetic properties of disordered
Fe$_{x}$Pd$_{100-x}$ alloys $(50 < x < 85)$ are investigated in the framework
of density functional theory using the full potential local orbital method
(FPLO). Disorder is treated in the coherent potential approximation (CPA). Our
calculations explain the experimental magnetization data. The origin of the
tetragonal distortion in the Fe-Pd magnetic shape memory alloys is found to be
a Jahn-Teller like effect which allows the system to reduce its band energy in
a narrow composition range. Prospects for an optimization of the alloys'
properties by adding third elements are discussed.
