State Street Bank and Trust, a powerhouse in institutional money management, is quietly establishing a presence in the retail mutual fund business.

Traditionally, Boston-based State Street has stuck to the wholesale side of the mutual fund business, providing custody services for investment companies and offering its own Seven Seas family of mutual funds to institutional clients, such as corporations and pension funds.

A few months ago, however, State Street began marketing its Seven Seas family of mutual funds directly to individual investors. The minimum investment is $1,000.

Juggling Relationships

State Street officials say they aren't launching an all-out assault on the retail marketplace.

Nevertheless, "we can still play in that game," said Nicholas A. Lopardo, chairman and chief executive of State Street Global Advisors, the asset management unit. It has $121 billion in assets under management in the U.S. and abroad.

In an interview in his office, Mr. Lopardo said he thinks retail sales -- chiefly to individual retirement account investors -- could soon make up 30% of the bank's total proprietary fund sales.

And he expressed confidence that State Street can juggle its increasingly complicated business relationships.

"I think we can do the custody work for mutual fund complexes, we can compete against them, and we can use their funds for our cash management," he said.

State Street started considering ways to make a limited move into the retail mutual fund business about two years ago, according to Mr. Lopardo. One attention grabber in Boston was a sudden profusion of billboards advertising mutual funds.

The Seven Seas Funds, with $4.3 billion in assets, were the bank's springboard into the retail market.

State Street put together an information packet called "Moving Day for Your Money" to introduce individual investors to the funds by helping them understand how to move their IRA accounts without incurring tax penalties.

Two money market portfolios hold about 85% of the Seven Seas Funds' assets -- $3.7 billion in all. But five longer-term portfolios -- that is, stock and bond funds -- are attracting interest from retail customers.

Yield-Plus Fund

The biggest non-money-market portfolio in the Seven Seas family is the Yield-Plus Fund, which invests in short-term bonds. Its assets total $318 million.

The second-largest is the Seven Seas S&P 500 Fund, whose performance is linked to the Standard & Poors 500 index. The fund, opened Dec. 31, has $186 million in assets.

Four new portfolios are in the pipeline, according to an executive at Frank Russell Investment Management Co., the Tacoma, Wash.-based company that administers and distributes the Seven Seas Funds.

The Securities and Exchange Commission recently approved two international stock portfolios: one investing in Pacific equities, the other in European equities. In addition, two Treasury portfolios are in registration, the executive said.

Advisory Services Offered

Another way State Street Global Advisors has branched out is by offering its investment advisory services to retail mutual fund providers.

State Street recently was awarded a contract to act as investment advisor for the Colonial U.S. Growth Fund. The fund, offered by Colonial Group Inc., a Boston-based mutual fund company, is marketed through a variety of retail channels, including banks.

"We wanted to create a fund that would make available to the individual investor the same investment approach that the pension clients of State Street are using," said C. Frazier Evans, senior vice president for Colonial.

The fund, introduced last July, aims to outperform the S&P 500 stock index. In its first six months, it returned 9.6% compared to the S&P's 7.6%.

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