About four months after unveiling its new line of mutual funds, Citicorp is at a crossroads.

The banking behemoth has attracted close to $400 million of assets for its CitiSelect portfolios, which it introduced in June. That quick success has brought with it a slew of questions for Citicorp, which now must decide just how large a mutual fund player it wants to be.

"It's something we are actively thinking about," says Peter Meenan, head of global funds at Citibank.

Until the launching of its CitiSelect portfolios, Citicorp had put relatively little emphasis on proprietary funds. Its older family, the Landmark Funds, consists mostly of mundane money market mutual funds - not the stock and bond funds that fuel real growth.

But with CitiSelect, Citicorp signaled a new commitment to the mutual fund game. The funds carry not only the bank's well-known brand name but also an approach to investing that is widely viewed as sophisticated.

It has relied on more than a sophisticated structure to help sell its new funds, however. During an "introductory period," the bank offered the funds without a "load" - the sales charge typically imposed by fund providers in exchange for financial advice.

Originally scheduled to last one month, the promotion is still going on and may continue indefinitely.

"We're doing a lot for people, so having a load is not necessarily unfair," says Mr. Meenan. "But if we feel it has better appeal," Citicorp may choose to waive the load forever.

Like all asset-allocation portfolios, the CitiSelect funds invest in a mix of stocks, bonds, and money market instruments that is shuffled periodically as market conditions change. But while Citibank is lead investment adviser to the funds, it has also signed up subadvisers to manage investments in specific asset classes.

That decision has given the portfolios a level of diversification that other asset-allocation products lack, observers say. The funds' subadvisers include Miller Anderson & Sherrerd for large cap value stocks, Hotchkis & Wiley for international stocks, and Franklin Advisory Services for small cap value stocks.

"It's innovative," says Avi Nachmany, a partner at Strategic Insight in New York. "Using unaffiliated and well-known subadvisers makes a lot of sense."

After their introduction, the funds, which require a minimum investment of $1,000, were meant to charge a 4% front-end load. Investments of $100,000 or more were to get a declining load structure.

For Citicorp, the load/no-load question is about more than just fee income. While permanently waiving the sales charge would make the CitiSelect portfolios more appealing to investors, it would also pave the way for Citicorp to offer its funds through new sales channels - including the widely popular fund "supermarkets" operated by Charles Schwab & Co. and Fidelity Investments.

Clearly, Mr. Meenan is attracted to the idea of offering CitiSelect through those fund marts. When another banking giant, NationsBank Corp., announced plans to make its funds available through Schwab's OneSource, the move was heralded as proof of its commitment to the U.S. fund market.

"People in the U.S. continue to be confused about what to do" about investing, Mr. Meenan says, "but they want the flexibility of having different service providers. They like the flexibility of the mutual fund marketplaces."

Still, Citicorp is far from committed to that route. "We have to decide how we want to manage these relationships," Mr. Meenan says, referring to investment customers. "We've traditionally had load funds. How can we reconcile that?"

A move to the fund supermarkets could also prompt Citicorp to abandon the CitiSelect moniker in favor of the more generic Landmark name. "The appeal of a fund family is certainly less of an attraction than it used to be," Mr. Meenan admits. Consumers do not want to feel they are getting all their investments from a single provider.

Meanwhile, Citicorp is confident that the new funds are sophisticated enough to offer investors the sort of flexibility associated with OneSource and similar services. The four CitiSelect portfolios use a proprietary asset allocation model to determine an appropriate mix of stocks, bonds, and cash for each investor, Mr. Meenan explains.

The funds offer eight asset classes and access to a broad mix of money managers. The bank relies on what Mr. Meenan says is a "comprehensive screening process" to select its subadvisers.

"Ninety percent of investment returns are a direct result of how you allocate assets," he explains. "That decision is made by Citibank."

While its CitiSelect funds are a relative latecomer to the bank mutual fund scene, Citicorp is no neophyte in the investment business. The bank currently manages more than $83 billion of assets around the world, and it is the second-largest manager, behind Fidelity, of off-shore funds.

With CitiSelect, the bank is trying to bring some of that global strength to bear in the U.S. mutual fund market. Whether it chooses to pursue the strategy wholeheartedly remains to be seen.

During their first six weeks of availability - a period that included July's wild stock market swings - the funds attracted a whopping $200 million of assets. Investors include both customers of the bank and newcomers, and they span the very wealthy and mass markets, Mr. Meenan says.

"They've had a very quick level of success," says Les Dinkin, president of NBW Consulting. "They are now trying to figure out how to take it to the next level. They are at a crossroads."

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