Banks are still carving out their niche in the high profile business of managing mutual funds, but they have long dominated the important behind-the-scenes role of fund custodian.

Custodians are the safe-keepers of the securities that make up a mutual fund portfolio. The duties of a custodian include processing buy-and-sell orders and making sure transactions are properly cleared and settled.

Mutual funds pay a scant two or three basis points per dollar of assets for custody services. Thus, the name of the game is amassing assets, and the business is technology-intensive, according to Glen Casey, a consultant with Cerulli Associates, Boston.

State Street Bank and Trust dominated the fund custody business in 1993, with $497.1 billion of assets under custody, according to a ranking by Lipper Analytical Services, Summit, N.J.

Fund Growth a Spur

Based on the going rate for service, the Boston bank's fund custody services would have produced upwards of $100 million in revenues last year. A spokesman declined to confirm the figure.

Like other players in the custody business, State Street has benefited from the rapid growth of the mutual fund industry. Its custody assets grew by 26% last year, from $394 billion at the end of 1992.

Three other commercial banks had at least $100 billion of fund assets under custody last year: Bank of New York, with $203.2 billion; Chase Manhattan Bank with $176.0 billion; and Brown Brothers Harriman, with $114.4 billion.

Some mutual fund and financial services companies have nudged their way in through acquisitions of trust companies.

Putnam Fiduciary Trust Co., a unit of the Putnam Cos., ranked eight, with $54.3 billion of assets under custody. And IDS Bank and Trust, a unit of American Express, was 14th, with $20.8 billion of assets under its belt.

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