Great Western Financial Corp.'s decision to pull its mutual fund complex off the auction block could signal problems for other banks looking for a quick and lucrative exit from the fund business.

While Great Western said this week it postponed a sale of Sierra Capital Management in light of H.F. Ahmanson & Co.'s hostile takeover bid, the industry consensus is that the thrift was unable to fetch the price it wanted. That could spell trouble for future buyers and sellers of mutual fund units, investment bankers said.

"I think it is a powerful message that a very small mutual fund complex has very small value to the consolidators in this business," said William Houlihan, an investment banker at Keefe, Bruyette & Woods Inc. in New York.

If the Sierra funds were attracting low bids in today's bull stock market, Mr. Houlihan said, the value for small fund complexes will only go lower in the future.

"The economic message (to companies thinking of selling their mutual funds) is they ought to sell now because premiums are only going to get worse," Mr. Houlihan said.

Chatsworth, Calif.-based Great Western put its $3.4-billion Sierra Capital Management unit on the block in October. Its move sparked industry speculation that other financial institutions would soon follow its lead.

But now, investment bankers say, some banks might hold on to their funds rather than sell for a low price. That would leave potential buyers with a slim selection of fund complexes to choose from, said Peter L. Bain, managing principal at Berkshire Capital Corp., New York.

Keefe's Mr. Houlihan suggested that banks with small mutual fund families would benefit from a joint venture with another small fund complex if they decide not to sell outright. Or a bank could opt to sell its funds to a cooperative. That would allow it to retain some ownership and offer the product to customers while taking advantage of cost benefits available to a larger fund family.

An executive at a consortium that plans to buy mutual funds from banks said those with small fund families should sell out now.

"The economics of a lot of these funds are not very attractive, despite what people say," said Joseph T. Grause, managing director at Cypress Holding Co., Boston. He said other institutions are likely to try selling their funds even if Great Western pulled the Sierra complex off the block because it couldn't get an attractive price.

While the fund structures of most banks are not comparable to Great Western's-which is managed by outside subadvisers that share the management fees with the thrift-observers said banks will continue to struggle to come to terms with their largely unsuccessful run in the fund business.

"There are still some banks looking and evaluating" their fund businesses, said Joy P. Montgomery, a consultant at Money Marketing Initiatives, Morristown, N.J.

"I can see banks, even in today's stock market robustness, deciding to get out of the business because they haven't figured out how to deal with the temperament and compensations in the investment world," said Geoffrey H. Bobroff, an East Greenwich, R.I. mutual fund consultant.

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