Evan Rapoport, Co-Founder of HedgeCo Networks, has been blogging up a storm over at his Capital Introduction Blog.
Borrowing from years of experience raising capital for hedge funds and other institutions, Evan takes a very direct and knowledgeable approach to navigating through the often tricky waters surrounding marketing your hedge fund.
First, the basics. What is hedge fund third party marketing? Third party marketers (3pm’s) are essentially hedge fund brokers. They represent various hedge fund products and introduce and sell these products to qualified investors. As a result of the introduction and follow up by the marketer, if an investment is made, the 3pm gets compensated. Usually compensation comes in the form of a portion of fees. The ‘standard’ 3pm fee is 20/20. That is, twenty percent of both the management fee and the performance fee. This is usually paid to the 3pm’s brokerage firm as the fund receives its fees, and is usually paid to the marketer for the life of the client.
Where does a hedge fund manager find third party marketers to market their hedge fund? The Third Party Marketers Association (3pm.org) estimates there are about 500 third party marketers in the United States. Not very many, relative to the amount of hedge funds that are out there. There are several firms like mine, HedgeCo Securities, that are set up to exclusively market hedge funds. You can find these firms by searching some of the various hedge fund website service provider directories, or by looking at 3pm.org. Keep in mind, with some 10,000 estimated funds, and only 500 3pm’s, it is easy to realize why 3pm’s have a reason to be picky. So if you are a hedge fund that is less than 10-25 million (and I am being very generous here), don’t be surprised if you do not find a third party marketer to represent your fund…
Read the entire article “Hedge Fund Third Party Marketing and Marketers” here.
Evan Rapoport also wrote a 3-part series on Hedge Fund Administration and how it not only is necessary for the running of a hedge fund, but is also crucial for your investors and your marketing efforts. This series is a must-read for investors and hedge fund managers alike.