When it comes to mutual fund performance, Commerce Bancshares is showing that small can be beautiful.

The $9.2 billion-asset banking company, based in Kansas City, Mo., entered the proprietary fund business in December 1994, starting six mutual funds with $250 million of trust assets.

Since then, the Commerce fund family has posted above-market returns and attracted a steady stream of new investors.

"We put our heads down and went for it," said Peter Mackie, executive vice president of Commerce's investment management group. "From a performance point of view, we picked a good time to do it," he said, acknowledging the healthy boost from last year's steadily rising markets.

But Commerce's track record stands out even among the healthy gains posted by most stock and bond funds last year.

Four of the bank's funds - growth, aggressive growth, balanced, and bonds - ranked in the top quarter of their categories for one-year performance, according to Lipper Analytical Services, Summit, N.J.

The Commerce Growth fund, with $149 million of assets at yearend, led the way with a 39% return. That put it among the top 9% of 572 growth funds, according to Lipper.

Building customer confidence with a good performance story is especially important for new funds, said Geoffrey H. Bobroff, a mutual fund consultant in East Greenwich, R.I. "There is no alternative - and success is driven by getting the word out there," he added.

Bank executives were quick to agree.

"My role in keeping customers with Commerce is to make sure the investment results that come out of these funds are competitive," said Gary Campbell, senior vice president and chief investment officer for the funds. "If they're not, the money will be wired out of here in a flash."

But that hasn't proved to be a problem.

Instead, investor money has been pouring in at a rate of $600,000 to $1 million each business day, Mr. Campbell said. From inception through the end of January, fund assets rose 77%, to $442 million.

The bank, a major presence in Missouri's two largest cities, is concentrating investment management duties for stocks in Kansas City and for bonds in St. Louis, Mr. Campbell said.

Investment choices are made in-house, except for an international stock fund subadvised by Rowe Price-Fleming, Baltimore.

The bank skipped offering its own money market fund, choosing instead to use money market products from Goldman, Sachs & Co., which is distributor and administrator of the Commerce funds.

Commerce's strategy is to stick to its knitting and offer basic funds.

"We think we can compete very nicely," said Mr. Campbell, "where we can go after customers who don't care a bit about esoteric types of funds."

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