As with most every other type of financial campaign, hedge fund marketing can be broken down into 2 or 3 distinct methods.
With a type 1 plan, the managers or sponsors of the fund perform all of the marketing tasks without a need for a third party to intervene on their behalf. The business of getting the word out is done entirely in-house in order to keep the strategy lean. In most cases, the leader of the marketing group will have dedicated employees whose sole task is devoted to this process. Many of them may also receive all or part of their compensation in the form of commissions or bonuses as a result of getting customers enrolled into the fund.
In order to use this approach however, the manager of the fund has to be able to obtain a broker dealer-license in the United States. That is so the proper regulations can be maintained. There are stringent standards that must be met before this type of licensure can be obtained.
The second approach calls for sponsors of the fund to have agents or finders in place in order to perform the hedge fund marketing tasks. All of the pre-contact work is done outside of the office and the leads are funneled into the firm for closure. This outsourcing arrangement calls for the agents to receive their compensation through shares of the fund performance from the managers. The drawback to this type of plan is that according to broker-dealer licensing rules, the finders cannot be compensated on a contingent basis. The United States prohibits this type of practice in companies specializing in hedge funds, but it is often how the strategy is set up anyway.
The last kind of hedge fund marketing practice involves major players on Wall Street such as Merrill Lynch or Morgan Stanley for example. The funds and their sponsors actually enter into a formal arrangement with these firms on a contract basis. Under these kinds of terms, the giant enterprises are paid from fees obtained like the agents, but they can also receive additional compensation from a sales charge or placement fee, making it advantageous for them to enter into this type of agreement.
It is not easy to perform hedge fund marketing. There are strict regulations set up in the United States of America for hedge fund marketing and these are enforced through the National Association of Securities Dealers who helped to set up the policies to ensure that fair practices are used to protect investors and their assets.
