Mutual fund companies had better beware.

In a dramatic example of the "short listing" that many banks are engaged in, First Chicago Corp. is moving to slash its lineup of outside funds to 50 from about 150 now.

"Our highest priority over the next few months is taking a close look at the funds we sell," said Richard Davies, president of First Chicago Investment Services Inc.

In evaluating outside mutual fund companies, the bank is looking not just at the quality of their products but alsot at the service and support they provide, he said.

"It's not like we had a really hard list to start with," Mr. Davies said. "Historically we've given our reps a lot of discretion over what they could sell," he said.

The first cut will shorten First Chicago's product offering list to about 80 companies, and the next cut should bring it to 50.

"That's about the right level," said David Nadig, a consultant with Cerulli Associates, a Boston-based company that tracs the mutual fund industry.

A number of banks across the country have been carrying out product reviews similar to First Chicago's. The goal is simple: to provide sales reps with manageable arrays of quality products.

While the number of funds that First Chicago now offers may seem large, "three-quarters of our slaes are already in 25 funds," Mr. Davies said.

He said relationships with some fund companies would be severed, though he declined to name any of those. With any given fund company, First Chicago may offer anywhere from one fund to the full product line.

"There are some fund companies that haven't made an effort to give us any service or support," he said. "Why do business with people who aren't investing in your business?"

Sales Support, Marketing Tools, Technology

Fund fimrs that provide sales support, marketing materials, and interesting computer technology will have a better chance of staying on the short list, Mr. Davies noted.

While many companies say they want to build a partnership with the bank, some wholesalers never visit or call, Mr. Davies said.

Meanwhile, First Chicago recently hired a full-time product coordinator to monitor and evaluate the investment products it offers and track performance.

Newcomers Won't Have Much of a Chance

Mutual fund companies that are just getting into the bank channel aren't likely to make First Chicago's short list.

Mr. Davies said that with proprietary funds establishing track records and gaining recognition, "if you're not already well established in the bank channel, it's already too late,"

First Chicago has its own eight-member mutual fund family, the First Prairie Funds, with about $1.4 billion in assets under management.

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