Updated November 19, 2020:

A third-party marketing agreement is used by investment companies, hedge funds, and start-ups when advertising directly to a potential client or investor is prohibited by federal regulations.

Overview of Third-Party Marketing

Third-party marketing serves as a consulting service for persons, such as hedge fund managers, who are in need of the expertise of experienced marketing professionals. These individuals may also be experts in the field of sales and investment marketing.

The role of a third-party marketer is raising assets. In return for the services provided by the marketer, the marketing firm earns a percentage, which is usually estimated at 20 percent. There are also the management and performance fees paid throughout the duration of the agreement with the investor client.

Third-party marketers are also referred to as third-party distributors. These marketers are individuals licensed by the Financial Industry Regulatory Authority.

Third-Party Marketing Services

Marketing services for third-party firms are usually completed off-site at the firm's offices. Marketing firms may be working on behalf of multiple investment managers at any given time.

The two areas that most often apply to third-party firms are marketing and sales. However, there are dozens of other activities that these firms handle.

In regard to a hedge fund client, the activities completed by the third-party marketer depends on the background and size of the firm and its client. Some of the services provided by marketing firms include:


  • The development of marketing materials.
  • Guidance regarding new products.
  • Development of the investor's database.
  • Media relations.
  • Request for proposal (RFP) development.
  • Event marketing.

Third-party marketers usually work on a commission basis, but some charge a small retainer along with taking a percentage of the fees based on the assets raised.

While experience plays a significant role in hiring a third-party marketing firm, the main point of evaluating and hiring a firm is almost exclusively based on the firm's ability to raise assets.


Sales and responsibilities that activities marketers are involved with include cold calling, attending industry conferences, managing a sales team, and organizing conference calls and on-site visits.

Additional responsibilities of a third-party marketer include managing the sales cycle, educating potential investors, and meeting with analysts.

Due to the depth of involvement and the variety of responsibilities that a third-party marketer undertakes, the marketing contract can last for three to five years. Often, the services agreement will include a clause that guarantees that the marketer will be paid even if the sale comes in after the marketer and the hedge fund client are no longer working together.

Third-Party Working Requirements

There are a few areas that third-party marketers look at before agreeing to work with a hedge fund. These include:

  • The client's track record. Marketer's like to work with clients with longevity.
  • Certain strategies are time-sensitive, making them out of favor at specific times. If your current strategy falls in that timeframe, third-party marketers will not come to a firm's rescue.
  • Marketers look at the history and track record of the manager, which are important factors.
  • The firms' fund infrastructure and performance are also important factors.

Third-Party Marketing Versus Multi-Level Marketing

While similar in name, the two have little in common. Third-party marketing firms are in the business of providing private marketing to procure sources of legitimate funding for investment hedge funds and start-ups.

Multi-level marketing is an often-used sales practice, although it has a controversial reputation. Its business model requires low-level distributors to pay commissions to higher-level recruiters.

For a multi-level marketer to be successful, they must recruit other salespersons. The marketer receives a commission on the sales of each salesperson they have recruited. An example would be a person working as a door-to-door salesperson. They make money on their sales plus commission on the recruited person's sales.

There is one similarity between the two marketing types in regard to affiliates. With third-party marketing, the affiliate is the third-party marketing firm that is working for the hedge fund or investment company.

Multi-level marketing, however, is dependent on recruiting affiliates for the company to be successful. The affiliates are relied upon to bring in diversity in investment cash flow to the owners of the company.

If you need help with a third-party marketing agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.