The decision to hire a third-party marketing agency is a significant step for any asset manager or hedge fund looking to enter one or more new markets. These specialised service providers distribute funds, develop tailored market and distribution strategies, and provide access to local investor networks.
But what exactly differentiates a mediocre from a great third-party marketing agency? What should you look out for when choosing one? In this article, we explain the key criteria and considerations for a third-party marketing agency and provide helpful tips on what to look out for when choosing one.
What exactly is a third-party marketing agency?
A third-party marketing agency is an external company that specialises in the distribution and marketing of investment products such as investment funds or hedge funds. It acts as an agent for the asset manager, helping it to place its strategies in new markets – often in regions where the asset manager does not have its own distribution structures and investor contacts.
The main tasks of a third-party marketing agency include:
- Fund distribution: the agency presents the asset manager’s investment funds to potential investors in order to acquire capital.
- Market entry strategies: development of strategies for entering new markets, e.g. in the European Union (EU) or the DACH region (Germany, Austria, Switzerland).
- Access to local networks: thanks to its existing relationships with institutional investors and distribution partners, the third-party marketing agency can quickly establish contacts with investors.
- Compliance and legal support: The agency ensures that all marketing and sales activities comply with the regulatory requirements of the respective country.
- Marketing and PR: Support in positioning the asset manager’s brand and all marketing and communication activities.
- Investor relations: Cultivation and support of existing investors, upselling of strategies/products and acquisition of new investors.
- Organisation of roadshows and events: Planning and execution of investor meetings and events to present the funds.
What are the advantages of using a third-party marketing agency?
A third-party marketing agency offers numerous advantages, particularly for asset managers looking to expand internationally.
Local expertise
Access to local expertise is a key advantage. Each region has its own market characteristics and regulatory requirements. A third-party marketing agency is familiar with these specifics and can ensure that all sales activities comply with local conditions.
Cost efficiency
Setting up your own distribution structure in a new market is often costly and time-consuming. An agency can accelerate this process and reduce costs, as no in-house teams are needed on site.
Access to networks
Thanks to their established contacts with professional investors such as banks, asset managers, family offices, pension funds, foundations, insurance companies and distributors, a third-party marketing agency can start marketing immediately. This saves time and facilitates market entry.
Tailored go-to-market strategies
Every fund is different, and a successful marketing strategy must be aligned with the fund’s specific objectives and strengths. A good third-party marketing agency offers tailored strategies that are aligned with the specifics of the asset manager, the investor target group and the market.
What should you look for when choosing a third-party marketing agency?
Selecting the right agency is crucial to the success of the partnership. Here are some factors to consider when making your choice:
Experience and track record
Look for an agency with a proven track record of distributing funds in the respective region. A third-party marketing agency that has already worked successfully with international asset managers will be able to offer you better access to the right investors.
Regulatory expertise
Each region has its own regulatory requirements. An agency that is familiar with the regulations of the respective markets can ensure that all activities are legally compliant and that there are no risks for the asset manager.
Strength of the network
A strong network is key to success in fund distribution. Check whether the agency has access to the right investors and whether these contacts match your funds.
Adaptability and flexibility
The best agency will be able to customise its services to your specific needs. A one-size-fits-all solution rarely works. Look for an agency that offers you tailored solutions.
Transparency of fees and structure
A clear overview of costs and commission structure is crucial. Clarify the various pricing factors such as commission on acquired AUM (assets under management), monthly retainer, set-up costs, commission tiering and marketing costs.
Ongoing support
A long-term partnership requires regular communication and reporting. Choose an agency that will keep you regularly informed of progress and is flexible enough to respond to market changes.
Possible disadvantages of working with a third-party marketing agency
Although working with a third-party marketing agency offers numerous advantages, there are also some potential disadvantages that should be considered.
Dependence on external partners
Dependence on an external agency can lead to a loss of control. As an asset manager, you have less direct influence on the sales process and strategic implementation on the ground. If the agency is not delivering the desired results, it may be difficult to intervene or make adjustments at short notice.
Possible conflicts of interest
A third-party marketing agency can distribute several funds from different asset managers at the same time. This can lead to conflicts of interest, especially when similar products are offered by different managers. It is important to ensure that the agency has clear agreements in place for avoiding potential conflicts of interest.
Cost
The cost of a third-party marketing agency can be high, especially if the remuneration is based on a performance-related commission (e.g. based on assets under management). In some cases, the long-term cost of an external agency could be higher than it would be to build your own internal team.
Limited brand presence
Since the agency acts as an intermediary, it can be difficult to position your brand identity clearly and directly in the new market. The agency represents the asset manager professionally, but direct contact and the connection to the brand could be limited.
These disadvantages are important to consider and should be carefully weighed when deciding for or against a third-party marketing agency. Nevertheless, many of the risks mentioned can be minimised through clear contracts, transparent communication and close cooperation.
Success factors for a fruitful third-party marketing partnership
The success of a partnership with a third-party marketing agency depends not only on the agency itself, but also to a large extent on the asset manager’s commitment and contributions. Here are the most important success factors:
Clear communication
Transparent and open communication is essential. Regular meetings, reports and updates ensure that both parties are up to date and that any challenges that arise can be quickly resolved.
Defined goals
Both sides should be clear about the objectives of the partnership from the outset. These include clear sales targets, target markets and time frames.
Regular feedback
The agency should provide regular feedback and progress reports. At the same time, the asset manager must provide information on new fund strategies, performance data or regulatory developments.
Flexibility
The financial market is dynamic, and both partners must be willing to adjust their strategies as needed. Flexibility on both sides is key to responding to changing market conditions.
How to avoid common mistakes when choosing a third-party marketing agency
Some mistakes can make working with a third-party marketing agency more difficult. Here are some points to watch out for:
- Unrealistic expectations: Avoid agencies that promise guaranteed results. Fund distribution depends on many factors that cannot be fully controlled.
- Opaque cost structures: Make sure you fully understand the agency’s cost structure to avoid unexpected costs.
- Selecting only by price: Don’t choose an agency based solely on the lowest price. The quality of the service and the network are often more crucial to long-term success.
How FundFinity stands out
FundFinity is a specialised third-party marketing agency that supports international asset managers and hedge funds in successfully marketing their strategies in the EU and DACH region. Our strengths lie in our deep understanding of local markets, our close relationship with institutional investors and our tailored approach to each fund strategy.
At FundFinity, we emphasise clear communication, transparency on fees and a flexible approach that prioritises our clients‘ individual needs. Our track record and strong network in the EU make us a trusted partner for asset managers looking to expand into new markets.
Conclusion
A third-party marketing agency can be a valuable partner for asset managers or hedge funds looking to expand internationally. However, selecting the right agency and working together successfully depends on clear communication, flexibility and a high level of commitment from both sides.
Are you ready to take your fund distribution to the next level? Contact us now to find out how we can successfully market your funds in Europe.
