While many banks have rushed into managing their own mutual funds, California Federal Bank is resisting what it says is a siren song that more often leads to problems than profits.

The Los Angeles-based savings bank has been selling mutual funds since 1989, but executives said they never seriously considered offering their own funds.

While other large thrifts pride themselves on actively managing their own funds, $14 billion-asset CalFed would rather rely on funds from such well-known outsiders as Oppenheimer Management Corp., Putnam Investments, and Franklin Resources.

"We don't have that capacity and it's too risky to build," said Edward C. Harshfield, CalFed's chief executive. "It's our fundamental belief that we should not be in that part of the business."

He cited investor suits against Los Angeles rival Great Western Financial Corp. as a strong reason not to develop and pitch proprietary products.

Instead, CalFed has concentrated on marketing other firms' funds, using a sales force of nearly 250 platform workers.

That translates to about two licensed representatives in each branch, said Jeffrey A. Rigsby, executive vice president for the investment products subsidiary of the bank.

"We focus on delivery," he explained. "We're in the business of selling."

By offering only name-brand funds, Mr. Rigsby said, the thrift avoids the lack of identity and track record that hinder sales of proprietary funds at many banks.

"A critical component of discussing investments is that you have a history to express," he said.

Last year, fees from sales of mutual funds and annuities contributed nearly $22 million to the thrift's income.

Fees are unlikely to approach that level this year because sales of investment products are down at CalFed, largely because of a falloff in fixed-rate annuities.

Nevertheless, the thrift continues its commitment to investment products, placing the emphasis on mutual funds, which currently account for half of all investment products sales.

And rather than establish its own brokerage, CalFed uses the help of investment marketing firm Invest Financial Corp., Tampa, and 35 full- service brokers to support mutual fund sales by platform workers.

But CalFed's outsourcing approach is not without its critics.

Many bankers cite the promise of recurring revenues from managing mutual funds as one of the strategic reasons to enter the business.

But Mr. Harshfield downplayed the fees the thrift forfeits by not managing proprietary fund assets: "We forgo income but, on the other hand, by having it in-house you also raise your risk profile."

Some observers also criticize the savings bank for building its investment products sales effort around platform workers rather than full- service brokers.

"The argument on paper is that platform people have a one-on-one relationship with customers," said John P. Sousa 4th, a consultant with Investment Program Management, Henderson, Nev.

"But I've never seen that converted into multiple relationships. They simply don't have time."

Despite the challenges, CalFed executives said they have no regrets about their strategy. The closest CalFed came to a proprietary product was applying a private label to Oppenheimer's Main Street Fund several years ago.

"We tried it for a few years," said Mr. Rigsby. After dropping the CalFed name from the fund, the thrift continued to offer the Oppenheimer fund on its short list.

"It's still one of our best moving funds," he said

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