With $500 million of assets under management, Poland's mutual fund business is a mere blip on the screen compared with the $5.77 trillion U.S. market.

Nonetheless, Pioneer Group Inc. has prided itself on being the oldest and largest player in this modest market.

Now the Boston-based company has a new opportunity in Poland: gathering pension fund assets as the country reforms its retirement system.

But as it goes after that business, the company faces a stiff challenge. Insurance companies, widely recognized and trusted by Poles and armed with larger distribution networks, are likely to dominate the market, observers said.

Given that reality, Pioneer is aiming for a modest chunk of Poland's pension business. And the company hopes that its retail mutual fund assets will grow as Poles become more familiar with the concept of retirement savings.

"For us, the pension fund business is the basis for the growth and expansion of the asset management business in Poland," said Alicja K. Malecka, chief executive of Boston-based Pioneer's international arm.

In March, Poles for the first time ever started choosing among private companies to manage a part of their pension assets.

Those under age 30 are required to contribute 9% of their salary to a fund of their choice. Participation is voluntary for those between 30 and 50.

Pioneer is hoping to sign up about 8% of the six to eight million Poles who are expected to join the system by yearend.

"I would love to sign up 50% of the market, but I am realistic," said Ms. Malecka.

Warsaw, the nation's capital and its wealthiest city, is full of hints of American popular culture, from McDonald's and Dunkin' Donuts to bus shelters splashed with Monica Lewinsky's face, courtesy of gossip magazines.

But the similarities only go so far. Investing is largely an unknown concept outside the richest of Poland's 38 million citizens, many of whom do not even have bank accounts.

Insurance companies are far more familiar and trusted than mutual fund companies. That, along with their vast network of sales agents, helps to explain why 80% of the first 1.1 million Poles to choose pension managers selected insurers.

"We are less understood by the general population," Ms. Malecka said.

A native Pole, Ms. Malecka was the original manager of the country's first mutual fund-created by Pioneer in 1992.

The company is counting on that history and its high profile in the retail funds market, where it has more than 60% of the assets under management, to attract pension assets.

But central to gathering those assets are Pioneer's efforts to increase distribution, observers said.

The company recently agreed to sell a 30% stake in its pension fund to the international arm of Nationwide Insurance Enterprise of Columbus, Ohio.

The deal gives Pioneer a partner that is experienced in organizing and managing a large sales network, said Krzysztof Szajek, the president of Pioneer Pension Fund Co.

The company already has about 6,000 agents and is hiring and licensing at least 2,000 more. Most will sell door-to-door like insurance agents. Others will sell pension funds and retail funds out of Pioneer offices.

"There is a real war for clients, so we should have a big army of representatives," said Mr. Szajek said.

Pioneer is up against some large armies. Commercial Union, a British insurer, has more than 23,000 agents.

While no official statistics are available, industry players identified Commercial Union, along with PZU, an insurance company that is owned by the Polish government, and National Nederlanden, a Dutch insurer, as the three companies that have garnered most of the pension customers so far.

Said Ms. Malecka: "When you have competitors starting with tenfold distribution networks, statistically your initial potential market share can be expected to be lower."

Performance of the funds is not likely to be as big a selling point as it is in the United States because returns will probably stay within a fairly tight range, observers said.

That is because of strict investment guidelines laid down by the government in an effort to safeguard investors' money.

And Polish investors are more likely to value security than a slightly higher return, said Marek Mazur, the president of the Foundation for the Development of Pension Funds, a Polish consulting firm.

"People won't pay attention to something that's a little bit higher," he said. "In the short run it may look attractive, but since they may prefer security to higher rates of return, they may overlook it."

The intense competition for investors came into plain view in February, when pension fund managers were allowed to begin advertising and unveiled a barrage of billboards and television and radio commercials, along with newspaper and magazine advertisements.

Unlike some fund managers, Pioneer has not spent scads of money on advertising. But even Pioneer's rivals agree that advertising is not as important as strong distribution

"Publicity doesn't sell this product," said Zygmunt Kostkiewicz, the chief executive of Commercial Union's pension fund company.

While competitors spent up to $30 million, Pioneer budgeted a small fraction of that amount, said Larry R. Wilder, Pioneer's vice president in charge of sales and marketing.

Meanwhile, as the pension fund company courts Poles, Pioneer's mutual fund arm is courting management boards and union leaders to set up employer-sponsored pension funds.

Those funds are the next phase in Poland's effort to privatize its pension system.

Mutual funds and life insurance products are expected to be the primary investment vehicles for these funds, but insurance companies are likely to have the upper hand once again because of their distribution capabilities.

"In many companies, management boards will choose life insurance only because of the fact that they won't have the opportunity to meet anyone from investment fund companies," said Marek Zytniewski, the senior vice president of Pioneer First Polish Investment Fund Co.

Pioneer has agreements to set up employer-sponsored funds for at least eight companies and is in talks with others, Mr. Zytniewski said. It is also courting employers who already offer a similar product by Pioneer.

"It is difficult to judge in which cases we will be successful and what part of the market we will have," Mr. Zytniewski said. "We will do our best."

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