are getting caught in the undertow. In recent years, about two dozen mutual fund companies have been carefully cultivating banks as outlets for their wares. Banks, in turn, have been choosy about which companies to do business with, typically whittling lists to just five or six vendors. But as banks pair off in their merger spree, many fund companies are suddenly having to build these hard-won relationships all over again. "It's frustrating when you put a lot of time and energy developing a relationship and it disappears in one fell swoop," said Henry Schulthesz, senior vice president, national accounts manager at Kemper Financial Services, Chicago. To be sure, consolidation in the banking industry favors a few companies, such as Putnam Investments and Franklin Resources, which dominate sales through banks. But just about everyone else is scrambling to hold onto their precious shelf space at banks. Take Delaware Group, a small mutual fund company in Philadelphia, which has been generating 10% of its sales through banks at Reading, Pa.-based Meridian Bancorp. Meridian announced last month it was selling out to CoreStates Financial Corp., a bank that does not offer Delaware's family of mutual funds. "We're spinning our wheels," said Joanne Mettenheimer, vice president, director of Delaware Group's financial institutions division. "I feel like I'm not being very effective." Fund executives say it can take up to two years of regular entreaties to a bank before landing its business. Delaware is one of a group of fund companies - reportedly nine - competing for CoreStates' attention at a "beauty contest" this week. Others include Oppenheimer Management Corp., whose funds sell well through Meridian but are not offered by CoreStates. The banking company said recently that it has put its entire mutual fund sales program under review as part of a corporate-wide restructuring plan, but declined to elaborate on how it will sort through this week's presentations. Delaware is one of about 25 mutual fund companies that has pushed into the bank channel by establishing a separate sales force to focus on banks. Industry experts say only about a dozen have made significant inroads, generating more than 10% of their sales through banks. Even fund companies on solid terms with acquisition-minded banks can find themselves on shaky ground when a deal is struck. Though banks routinely review their relationships with fund companies, mergers often inspire more thorough reappraisals. For instance, Minneapolis-based First Bank System is scrutinizing its relationships with six vendors in the wake of its recent acquisitions of Metropolitan Financial Corp. and Firstier Financial. Relationships established two years ago with Voyageur Funds, Colonial Group, G.T. Global Financial Services, Putnam, and Fortis Financial Group are being reviewed. "At the time, we believed they were some of the better companies that presented to us - that doesn't necessarily mean that is our opinion of all of them today," said Joe Tessmer, president of First Bank System's brokerage unit, FBS Investment Services. Based on recommendations of brokers at Metropolitan and Firstier, Mr. Tessmer and his sales managers are considering replacing some of the current vendors with Oppenheimer, Aim or Franklin. Fund company sales executives say they tell their representatives in the field not to worry about losing clients to acquisitions, because nobody can predict where the next takeover is going to happen. Even so, fund companies are more determined than ever to strike sales agreements with roughly a dozen large banks, because "if consolidation continues they will be the likely survivors," said Maryann Bruce, senior vice president and director of Oppenheimer's financial institutions division. Ms. Bruce has two senior managers devoted to getting the fund company on the short lists of those banks. After two years of trying, it finally made PNC Bank Corp.'s list - the first fund company added to that bank's list in three years. Citicorp, BankAmerica Corp., Chemical Banking Corp., Chase Manhattan Corp., and NationsBank Corp. are considered top prizes among fund companies. So are PNC Bank Corp., CoreStates Financial Corp., and First Bank System. One leading fund executive said "My guys in the Midwest are saying that if we don't get into First Bank System, we're going to be in a lot of trouble, because they're buying everybody." When a fund company's bank client gets acquired, sales representatives immediately call brokers at the acquirers and beg them to put in a good word with executives. And they call on the brokerage chief and sales managers hoping to snare an invitation to present themselves to the brokerage units. Delaware executives will attend the CoreStates presentation, but the banking company has said it wants to hear from the one who will regularly call on the bank's brokers. At Delaware, that's Zina DeVassel, assistant vice president. She is the "wholesaler," or saleswoman who for the last year dedicated 70% of her time training representatives and organizing seminars at Meridian. She was scheduled to talk about her training methods with the bank. Ms. DeVassel has a lot at stake personally, because her salary was tied in part to sales through the bank. But she is hopeful. "All these mergers and acquisitions gives us opportunity because banks are constantly reviewing their programs," she said.

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