For banks in the mutual fund business, the upcoming marriage of Keycorp and Society Corp. is more than just a megamerger -- it will be the first example of the result when two banks with ambitious mutual fund programs combine.

In fact, the potential for synergies between the two fund businesses has been hailed as a high point of the merger. Both banks boast highly regarded fund managers, and each has adopted an aggressive sales plan to turn proprietary funds into major forces.

Many Issues Pending

But two months after Key and Society announced their intent to merge, details on how they'll combine their mutual fund businesses remain sketchy. Issues that have yet to be sorted out include:

* Who will manage the combined bank's fund business?

* Under what name will the funds be marketed?

* Who will act as their administrator and distributor?

* Where will the mutual fund business be located within the new bank? The trust department? The fee-based financial services group?

Like all decisions regarding the structure of the new Keycorp, these issues are largely in the hands of the management committee charged with steering the merger.

But they must also pass muster with the boards of directors of the two mutual fund families. So announcements on the fund business may be slow in coming.

Meanwhile, speculation about the banks' mutual fund businesses is running rampant.

Many industry sources are betting that the post-merger bank's fund program will be headed by W. Christopher Maxwell, the high-profile chief investment officer for Keycorp's Victory funds.

Sources said Mr. Maxwell, who joined Keycorp from Chase Manhattan Bank's Vista funds last years, is likely to relocate from Key's Albany, N.Y., headquarters to Cleveland, Society's base and the designated headquarters of the new Keycorp.

There, Mr. Maxwell would oversee a bank mutual fund program -- which many sources expect will bear the Victory name -- with some $3.7 billion in assets. The combined bank's brokerage force is expected to boast at least 215 representatives, working in a branch network that would span 18 states from Maine to Washington.

Stern May Go to Trust

Mr. Maxwell, for his part, said it was too early to say what his role at the new Keycorp would be. "Until staffing is announced, I don't know where I'll be working," he said in a phone interview.

Mr. Maxwell's Society counterpart, Mary K. Stern, is expected to be offered a post in the new Keycorp's trust and investments department, sources said. A respected mutual fund veteran in her own right, Ms. Stern took the helm of the Society Funds this year after helping Minneapolis' Norwest Corp. become a bank fund power.

A Synergy Generator

At Society, Ms. Stern, now reports directly to chief financial officer James K. Wert. But Mr. Maxwell reports to John Mastriani, chief executiove of Keycorp's trust and investment management group. Mr. Mastriani answers to Ralph M. Carestio, a Keycorp executive vice president for financial services.

Sources said they expect Mr. Carestio will also relocate to Cleveland, where he would oversee fee-income businesses, including mutual funds and brokerage, insurance, and mortgage servicing. Mr. Mastriani, sources said, is likely to remain in Albany, overseeing sales functions for these businesses.

The combination of Keycorp's and Society's mutual fund programs is believed to be one of the more synergistic aspects of the Key-Society merger, which is expected to close March 31.

Keycorp is a relative latecomer to the bank mutual fund boom and currently has less than $1 billion in assets under management. But its 900-branch, 10-state network makes it an attractive addition to Society's better established fund business, which now has $2.4 billion in assets under management.

Society wanted to hit the $10 billion mark by 1997 but was somewhat limited by a branch network concentrated in Ohio.

Tandem 401(k)'s Planned

Keycorp and Society have already signaled to the marketplace just how powerful their combined fund businesses will be. By yearend, the two plan to begin marketing 401(k) retirement-savings plans in tandem. Key's product is largely targeted at smaller businesses, while Society's goes after middle-market and larger companies.

As it awaits the consummation of its marriage to Keycorp, Society is continuing to build its fund business. Just this week, it added eight funds to its family, bringin the total to 18. The $600 million of assets in the new funds were previously held in several of Society Nationa Bank's collective investment funds.

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