Expectation from the Relationship between Hedge Funds and Third Party Marketer
If it qualifies, a third party marketer is a treasured resource for a hedge fund. A number of advantages can be brought with the right arrangement with the right firm, including favorable relationships, growth, and value-added resources. A top class 3PM can attract serious investors and can also provide access to them, along with providing backing to a good deal for the general growth of a business apart from just adding assets.
Furthermore, by hiring a 3PM you get to outsource some of your sales and marketing functions. The contacts on the roll of a third party marketer may be those that a fund cannot have access to on their own or they may have those investors that the fund could only be able to reach to through ample amounts of effort and research, or by building strong enough relationships. It has taken the highest quality 3PMs ample amounts of effort to build lasting a profitable buy and sell relationships with the use of extraordinary relationship and analytical skills. However, even some of the critically evaluated investors have turned out to be a collateral damage of the crisis of credit, volatility, instability in the global economy, and a reduction in the workforce. Hence, a small fund should avoid one crucial mistake regarding the aspect of who they know.
If a third party marketer knows or has a long-term relationship with an investor that does not mean that they can surely get the investor to invest in a certain fund. There are a number of factors, including the existence of advisors and consultants, which affect the final decision of allocation. It is true that the attention of a fund can be gained by concrete intermediary or investor relationships of the 3PM, but it will not always help you attain allocations. No third party marketer has the power to make any investor assign. There is a long path that must be followed from the start to allocate. However, a good 3PM can result in certain benefits, like keeping a small fund on the locator of targeted investors and continuously communicating a concise and crisp story in a manner that is consultative.
The odds of an efficacious relationship between the two parties are enhanced when a fund makes the telling and selling job of a 3PM a far more interesting aspect regarding the fund. A large chunk of the fundraising and marketing activities are covered by a third party marketer; however, a 3PM may not be qualified enough to shape a firms story or a fund.
It is not the same thing as having the technique to create as to how the story of a fund should be explained and having the experience of selling or telling the story of a hedge fund, in the case where a story does exist. Below are a few important things that have been said by the heads of three different third party marketing firms:
- They clearly stated that their expertise does not lie in helping hedge funds put out their stories as to how they invest, although they have done this a few times.
- Some stated that each time they had to build a relationship with the manager of the hedge fund by making an effort to get the investors story out, they were unable to reach the underlying story as to exactly what was the investment process of the manager. Thus, these companies found themselves at a disadvantage and were less successful in their selling practices for those specific hedge funds.
- Most heads of third party marketers stated that they could sell hedge funds with a story that is acceptable, but they find it exceptionally difficult to create a story that is acceptable and they do not have practice in this field, hence they avoid working with such funds.
Requirements of a 3PM
What these marketing firms fundamentally require are a team of experienced individuals who have a track record of reliable performance, a low number of drawdowns, at least $100 to $200 million assets under management, impressive drive in the growth of assets, audited returns of three years, strong working infrastructure, and an obligation and determination towards marketing.