What is a 'Third-Party Distributor'

A third-party distributor is the name given to institutions that sell or distribute mutual funds to investors for fund management companies without direct relation to the fund itself. Mutual fund companies often party with third-party distributors with various fees and provisions involved with the partnership.

BREAKING DOWN 'Third-Party Distributor'

A third-party distributor partners with an investment company to sell mutual funds. Third-party distributors typically have comprehensive domestic and international sales teams in place to distribute the investment company’s mutual funds. Distributors also have a broad sales network and expertise in mutual fund distribution.

There are numerous fees associated with partnerships between third party distributors and mutual fund companies. The distributor usually receives sales charge commissions for selling the investment company’s mutual funds as well as a portion of the trailer fees associated with the fund. A mutual fund’s operational fees will also include a marketing expense paid to the distributor. A 12B-1 fee is the primary fund fee associated with the marketing and distribution of the fund. The 12B-1 fee is an annual marketing and distribution fee paid to the distributor

Role of Third-Party Distributor

Third-party distribution partnership agreements vary across the industry. Many third-party distributors also provide a range of services that support mutual funds.

As a distributor, the firm works with the investment company to build a marketing plan for distribution of the mutual fund. Third-party distributors typically employee distribution representatives with global distribution networks. They can be responsible for selling individual funds and working with brokerages to ensure the distribution of funds through electronic brokerage trading platforms.

In some cases, a company may build its own third-party distribution unit to partner with the investment company for distribution of mutual funds. Independent distributors also exist with a range of service offerings for mutual fund companies.

Examples of Third Party Distributors

Eaton Vance and Vanguard are two mutual fund companies who have built distribution units for selling mutual funds. Eaton Vance Distributors serves as the distributor for Eaton Vance mutual funds. The Vanguard Marketing Corporation is the distributor for the Vanguard mutual funds.

ALPS Distributors is one of the mutual fund industry’s leading independent distributors. ALPS provides distribution and broker dealer services for a wide range of mutual fund companies. Its clients range from startups to large, well-established fund companies. It has expertise in distributing a wide range of product types including open-end funds, closed-end funds, unit investment trusts, exchange-traded funds and private placements.

RELATED TERMS
  1. No Transaction Fee Mutual Fund

    A no transaction fee mutual fund is a mutual fund with no associated ...
  2. Mutual Fund Timing

    Mutual fund timing is the practice of trading mutual funds according ...
  3. Exchange Fees

    Exchange fees are a type of investment fee that some mutual funds ...
  4. Distribution

    Distribution occurs when a mutual fund, company or retirement ...
  5. IRS Publication 564: Mutual Fund ...

    IRS Publication 564: Mutual Fund Distributions is a publication ...
  6. Service Shares

    Service shares are shares of a mutual fund that charge an extra ...
Related Articles
  1. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  2. Investing

    A Guide to Mutual Funds Trading Rules

    Make sure to review this guide on the dos and don'ts of mutual fund trading before you invest, including how trades are executed and which fees to look out for.
  3. Investing

    Are Mutual Funds A Relic?

    We list some options other than mutual funds for your retirement plan.
  4. Investing

    Looking to Buy Mutual Funds Online? Here Is How

    Learn how to buy mutual funds online; discover which websites offer mutual fund trading services, how to choose a fund and typical fees.
  5. Investing

    Trading Mutual Funds for a Living: Is It Possible?

    Find out why trading mutual funds for a living isn't your best bet, including how funds discourage short-term trading and which options may better serve you.
  6. Investing

    When to buy a mutual fund

    Doing a little research can help you find out if mutual funds are a good fit for your portfolio.
  7. Investing

    The Advantages Of Mutual Funds

    Learn how mutual funds can give investors diversification, liquidity, and professional management at an affordable price.
  8. Investing

    The Advantages and Disadvantages of Mutual Funds

    As with most investments, mutual funds have both advantages and disadvantages.
RELATED FAQS
  1. How Do You Find Out the Price of a Mutual Fund?

    The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). Read Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
  2. Business Cycle

    The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles ...
  3. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  4. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  5. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  6. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
Trading Center