Sometimes David's wisest course is to avoid a head-to-head confrontation with Goliath.

That is the thinking as smaller bank fund units opt against marketing through their own brokerages in favor of using asset allocation and 401(k) programs as their primary channels. Fund units at Sanwa Bank California and First National of Nebraska Inc. find themselves bumping up against problems - such as limited distribution outlets and a lack of name recognition - that have plagued bank funds for years.

Executives at $9 billion Sanwa say they're well aware that the banking company's Eureka Funds are not playing in the same league as fund industry leaders such as Fidelity Investments and Vanguard Group.

"We know the Eureka Funds in the brokerage channel wouldn't be as competitive as some of the other funds we sell," said Kelly Saunders, a vice president and business manager for the funds.

So the Los Angeles-based bank has focused on selling the funds through its asset allocation and 401(k) programs. Established in November 1997, the Eureka Funds now manage $887 million of assets.

Ms. Saunders said Sanwa has considered adding a loaded share class that would be sold by its brokers, but bank executives are not convinced that such a move makes sense. "We're trying to be smart about how we do business," she said.

Sanwa and others face "roadblocks even the biggest banks have not overcome," said Geoffrey H. Bobroff, a mutual funds consultant in East Greenwich, R.I.

"Market share of proprietary products has been going down for 10 years," Mr. Bobroff said. Bank proprietary fund groups, even those that manage a lot of assets, he said, are "fighting an uphill battle against some of the biggest organizations in the industry."

Perception is also an issue. A recent study - conducted by Boston-based Financial Research Corp. and Natick, Mass.-based Market Facts Inc. - found that investors tend to see the largest fund companies as the best, regardless of actual performance.

"The in-house broker would rather sell a better-known third-party product than sell the home team," Mr. Bobroff said.

Jill Perry, the product manager for the Golden Oak Funds, the proprietary fund group of Flint, Mich.-based Citizens Banking Corp., knows that all too well.

Citizens depends on its trust department and in-house brokerage for most of its proprietary fund sales, but most of the brokerage's sales are of outside funds, Ms. Perry said. That has led to slower-than-expected growth for the eight-year-old Golden Oak Funds, she said.

Citizens, which has $4.9 billion of assets, has tried to counter that trend by organizing conferences for salespeople and customers that tout Golden Oak's performance and point out the fund managers' availability. But in the end, the greatest results have come from devoting more resources to the fund group, Ms. Perry said.

Efforts to produce better support material for salespeople and Ms. Perry's appointment as the fund family's first full-time product manager have contributed to a 40% growth in assets over the past 18 months, Ms. Perry said. The banking company now manages about $650 million.

In addition, on June 1 the bank is adding an international fund to the group and a popular B share - or back-end load - class to the funds, she said.

Small proprietary fund groups can be profitable, but banks need to be realistic and pick their spots, said J. Mark Naber, managing director of Optima Group Inc., a consulting firm in Fairfield, Conn.

"They should focus their attentions where they can make a difference," Mr. Naber said. Bank mutual funds work well in packaged products, such as retirement plans and cash management accounts. Unless a fund has spectacular performance, it does not make sense to market it widely outside the bank, he said.

This quarter $33 billion-asset Union Planters Corp. will sell its proprietary fund group outside its trust and institutional investments departments for the first time. Memphis-based Union Planters initially will sell its $500 million-asset fund group in its branches through its brokerage subsidiary, Nashville-based PFIC Corp. If it is successful, it will look beyond.

The move reflects the importance that banks are placing on providing a full range of financial services.

"Union Planters is a much larger organization than two years ago," said W. Murray Pate, president of the $33 billion-asset banking company's trust and investment management arm. "The case for proprietary funds is that much greater," both in terms of scale and the need for a wider range of products, he said.

In addition, "we're breaking down the silos endemic to banks," Mr. Pate said.

Bank funds can get mired in the past. The First Omaha Funds were established by First National Bank of Omaha, a subsidiary of $8 billion-asset First National of Nebraska Inc., in 1992 as a vehicle for trust and employee benefit plan investments.

As a result, the $450 million-asset fund group lacks features that would encourage a broker to sell them. The funds are all no-load and are not listed on the paperless settlement network that most brokerages use. Moreover, First National of Omaha does not even sell the funds through its in-house brokerage program, which was established three-and-a-half years ago.

David C. Jordan, who manages the First Omaha Growth Fund, said he has encouraged bank executives to add load-bearing share classes and to open portfolios such as aggressive growth or technology.

The bank has even looked at changing the fund family's name to "get over the regional association," said Mr. Jordan, who works for FNC Trust Group, a division of First National of Nebraska in Fort Collins, Colo.

First Omaha has been slow to react. Alan E. Schulz, a bank vice president who oversees the mutual fund group, said First Omaha is still considering its options.

"Everything is always under a constant form of review," Mr. Schulz said, "but it's a matter of getting to the right place at the right time."

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