Believing they have hit a roadblock in banks, executives at mutual fund company Keystone Investments Inc. are focusing their marketing efforts elsewhere.

Boston-based Keystone has told four of its six sales representatives who target banks to begin to include financial planners in their bailiwick, a company spokesman said. Previously, the four pitched to banks exclusively.

"We have not pulled out of the banks," the spokesman said. "We have made a strategic decision to allocate more resources to independent financial planners."

With $10.6 billion in assets under management, Keystone is one of many small fund companies that are finding it increasingly difficult to compete in the bank marketplace. Many banks want to limit their mutual fund offerings to a few big names so brokers and compliance officers can more easily track what they are selling.

"There's going to be less and less shelf space for anyone that is not a brand name company," said mutual fund consultant Burton Greenwald of Philadelphia. Smaller funds will "allocate their resources where they are more successful."

Banks were responsible for about 10% of Keystone's sales last year, according to Keystone. In 1994, the latest year for which data is available, Keystone ranked 22d among fund suppliers to the bank channel, according to American Brokerage Consultants Inc. in St. Petersburg, Fla.

In light of that performance, Keystone's executives are reexamining their bank division. One source said a Keystone top executive has admitted privately that the company has not been successful in banks and it will no longer focus on that marketplace.

In addition to weak penetration in banks, Keystone has suffered other setbacks in recent times. Two years of heavy redemptions in its bond funds have eroded Keystone's market share. And it has also lost much of its team of small company growth fund managers.

These problems have distracted Keystone from marketing to banks, said Louis Harvey, president of Dalbar Financial Services, Boston, Mass. While Keystone's bond funds waned, those of well-known companies, like Van Kampen American Capital and Franklin Resources Inc., made significant headway at banks.

Meanwhile, sales of Keystone's equity funds at banks also stalled.

"The equity funds had average performance, so they were not getting the shelf space," said Dennis Dolego, principal of Financial Research Corp., a Chicago-based company that tracks fund companies. "They got lost in the never-never world, where they kept trying to jump-start their distribution, but they haven't done very well."

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