Setting up a mutual fund, or a family of mutual funds. Only a few years ago, it seemed like such a perfect match: Banks, with their cozy--and coveted--retail relationships, and mutual funds, the hottest product to hit the retail investment market in history.That was then. But times have changed, or at least experience has taught a growing number of banks that running a mutual fund company is not as easy as they had thought. And now the business is getting worse as bank-run funds as a whole are witnessing net outflows. In the first nine months of 2000, banks experienced a $2.5 billion outflow, despite an increase of $155.4 billion by all mutual funds, according to Boston-based Financial Research Corp.

Fixed-income funds paced the bank outflows (see table), but bank-run equity funds had nothing to brag about either. Their net gain was a measly $209 million.

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