You don't get ahead in the bank mutual fund business by hiding your light under a basket. Just ask Mitchell Grant, the head of financial institutions sales for Putnam Financial Services.

"I want the world to know that we're the dominant figure in the marketplace," Mr. Grant said in a recent interview at the company's Boston headquarters.

"As far as I know, we're the No. 1 seller of mutual funds through banks, thrifts, and credit unions," Mr. Grant said. "We sold a little bit less than $4 billion last year."

There have been other claimants to the top spot, including Franklin Resources, San Mateo, Calif. (Data compiled by Alliance Capital Management, a New York-based fund company, said Franklin's $3 billion volume made it the 1992 bank sales leader.)

But figures on mutual fund sales are notoriously difficult to come by, and even harder to compare accurately.

|Extremely Successful'

Still, one thing is clear: Putnam staked out the financial institutions market early and aggressively, and has succeeded in making it a major chunk of its business.

"They brought a lot of talent from the outside to focus on the banking channel," said Avi Nachmany, a partner with Strategic Insight, a New York consulting firm. "They've been extremely successful."

Putnam already had five years of experience selling mutual funds through financial institutions in 1988, when it became one of the first mutual fund companies to establish a dedicated sales force and back-office operation for banks.

Last year, roughly a third of Putnam's $12 billion sales volume was done through financial institutions.

Because it identified the potential early on, Putnam didn't have to scramble for a piece of the action when the mutual fund sales boom got underway at banks last year.

"I think through our own efforts we've probably risen faster than the tide has," Mr. Grant said.

68 Retail Funds

More than 400 financial institutions offer selections from the Putnam family of 68 retail mutual funds. "If a bank has a so-called preferred list, then the majority of the time we're on that list," Mr. Grant said.

Putnam, founded in 1937, is one of the oldest and largest companies in the mutual fund business.

With $70 billion in assets, it ranks among the top five of all mutual fund companies, Mr. Grant said. And if large money-market portfolios of rivals like Fidelity Investments are excluded, Putnam is No. 1 in assets.

Mr. Grant thinks Putnam's size and its long history have helped make its offerings popular with banks and their customers.

Reputation for Prudence

Just as importantly, the company has cultivated a reputation for prudence. Its logo -- a balanced scale -- is meant to convey that Putnam is a full-service money manager, not just an equity house or a bond house.

The company makes much of the fact that the Prudent Man Rule -- a preeminent guideline for money managers for more than 150 years -- was written by Judge Samuel Putnam, an ancestor of company founder George Putnam.

"In this business you do not get either old or big by doing things wrong," Mr. Grant said. "And we are both old and big."

Mr. Grant, 47, joined Putnam in 1987, after a two-year stint with crosstown rival Massachusetts Financial Services. A North Carolina native, he helped Putnam to build up its sales through insurance agents and retirement plans before taking over the bank side three years ago.

He is a tall man with twinkling eyes and a deadpan style. Why was he picked to manage Putnam's bank sales? "When [company president] Bill Shiebler wanted someone to take our bank division to the next level, he felt I had experience, personality, and drive to get it done. And he was right,"

Credit Unions' Impact

In the 1980s, thrifts accounted for the majority of Putnam's financial institution sales; today, the pendulum has swung to the commercial bank side. Now, Mr. Grant said, credit unions are becoming a stronger force. and their customers have a somewhat different profile than do bank customers.

"Credit unions are selling to their members, who for the most part tend to be currently employed," Mr. Grant said. They're slightly younger than our banking customers, and they, buy more equities than our banking customers."

Thanks in part to those credit union customers, sales of stock mutual funds are coming on strong.

Last year, equity funds accounted for less than 20% of Putnam's sales through financial institutions; thus far in 1993, they're making up more than 30% of sales, Mr. Grant said.

The main reason is the continued decline in interest rates. "Not only are CD rates low, but the dividend yield on fixed-income funds is also low," Mr. Grant said.

"Some people arc looking for more income, more total return." he said. "They're being forced to look at equities because the traditional alternatives are becoming less attractive." The rise of the bank business has forced Putnam to make some changes in its marketing pitch.

Company brochures used to tell customers bluntly that mutual funds were much wiser investments than certificates of deposit. Yield comparisons illustrated the argument.

Not any more. Now the message is that "CDs should be considered by most people as part of their portfolio," Mr. Grant said.

However, he adds, "they're not sacrosanct."

Putnam has developed some brochures especially for banks, to help them explain why customers should consider investing in mutual funds.

And the company's sales literature includes comparisons of fixed-income bond funds versus fixed-income savings instruments, "which is euphemistic for CDs," Mr. Grant said.

"We're saying the same thing; we're just being a little smarter about that. I think clients appreciate that."

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