With four product lines and three sales channels, Citigroup's $125.1 billion-asset U.S. mutual fund business defies easy classification.

The company, forged through the merger of Citicorp and Travelers Group, now manages more domestic, open-end mutual fund assets than any other bank holding company. But seven-eighths of these assets are in Smith Barney Funds, which are not slated to be sold through Citibank branches.

Citigroup's "multibrand, multichannel" approach underscores the complexity and diversity of a financial services company with 100 million customers worldwide. In the United States, Citigroup's proprietary mutual funds are marketed through its bank, brokerage, and insurance subsidiaries.

"The most difficult part is deciding which brand to market in which channel," said Laurie Hesslein, director of U.S. marketing for the company's SSB Citi Asset Management Group. "If you start blurring all the lines, it takes away the position (each brand) has built."

She said the company would stress the Smith Barney Funds' active investment style and breadth of product; the strict, disciplined investment process of the CitiFunds; the Salomon Funds' focus on specific investment opportunities around the globe; and the conservative, middle-America slant of the Concert Funds, which Travelers acquired from the Van Kampen Funds on Dec. 31, 1997.

Citigroup is determined to build on this foundation to create a "top- tier asset management and mutual fund company," Ms. Hesslein said. Proprietary fund sales are crucial to that effort, "because the management fee is retained by Citi rather than going to a third party."

But for all its heft, Citigroup has some things to prove, said Geoffrey Bobroff, a mutual fund consultant in East Greenwich, R.I. Its Salomon Smith Barney unit hasn't been as effective as Merrill Lynch or Morgan Stanley in marketing its own funds, he said. Though Citigroup has a vast distribution network, "it hasn't been harnessed for a proprietary product, and that's the bottom line."

Ms. Hesslein conceded "there is more to do on the marketing and communication side." But she has no doubt the company is well on its way.

Cross-selling initiatives have already begun, she noted. For instance, the Salomon Funds have been sold through Citi branches since last summer, before the merger closed. And additional Concert Funds will soon be launched for sale through bank branches.

In a nod to Citigroup's complexity, Lipper Analytical Services is excluding most of the company's mutual fund assets from its quarterly rankings for American Banker. For now, only the $13 billion in old Citicorp assets are counted, placing Citigroup 17th among banking companies in the fund management business at yearend. (If all the Citigroup fund assets were included, Citi would topple Mellon Bank Corp. from the No. 1 spot it has held since 1994.)

If Citigroup is any indication, cross-industry mergers will make the mutual fund activities of diversified financial companies harder and harder to pigeonhole.

But a simple fact shines through: Citigroup is a bank holding company, and it is to the holding company that profits or losses from managing mutual funds ultimately will flow. Therefore, American Banker will begin counting all of Citigroup's fund assets as bank-related starting with the ranking for the first quarter of 1999, to be published in May.

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