Chase Manhattan Corp.'s asset management division is turning its attention to an industry that many investors have ignored.

At a recent forum on global markets, executives in the bank's mutual fund division said the current climate of deregulation among utilities has led them to reexamine the sector, which has lost money for three years.

"We have been increasing our exposure to electric utilities," said David Klassen, head of U.S. equities for Chase's global asset management division.

There have been "dramatic and fundamental changes in electric utilities which people have not picked up on."

Mr. Klassen said 15% of its Vista Equity Income Fund, which has $80 million of assets under management, is now invested in utilities, including electric companies, regional telephone operating companies, and gas companies.

Investors typically have viewed utility stocks as a safe haven. Like bonds, utility stocks reacted to the fluctuations of interest rates, dropping in value when interest rates have risen.

But Anthony M. Gleason, vice president and senior portfolio manager for the Vista Equity Income Fund since 1995, said that dynamic changed a few years ago.

"Interest rates were going down, and utilities were also going down," he said.

Mr. Gleason added that the need to build new power stations has diminished as deregulation has led to consolidation. Electric plants now can provide power across state lines.

Regulators have given electric companies the "go-ahead to begin cutting costs" and "reduce the price of electricity," Mr. Gleason said.

With the extra cash, electric companies "are starting massive share repurchases and paying down huge amounts of debt," he said. "So the picture gets better and better."

But the asset management division of the bank has no intention of starting a fund devoted to the utilities sector, he said.

According to data from Lipper Analytical Services Inc., there are 106 utilities funds. Only two of the fund families were created by banks: First Union's Evergreen Equity Utility Fund and Fleet Financial Corp.'s Galaxy Utility Index.

At least one industry observer advised caution.

"It will take a while for this all to be sorted out and understood," said Geoffrey H. Bobroff, an East Greenwich, R.I., consultant.

"If you create deregulation at the state level, you create a free-for- all within each state, and then within each region."

Electric utilities stocks, he said, "are no longer income cows. ... They are going to be, arguably, growth stocks, which means greater volatility."

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