As bank customers swarm to mutual funds, they are consistently picking the most conservative, risk-averse types.

That often means fixed-income funds -- but not always. As the following sample shows, fund suppliers are employing a broad range of investment strategies to meet the requirements of banks and their cautious customers.

Oppenheimer

New York-based Oppenheimer Fund Management Inc. has attracted conservative bank customers with a mutual fund that is based heavily on the concept of diversification.

The New York-based company's No. 1 seller through banks is the Strategic Income Fund. Fund manager Arthur Steinmetz pursues a three-pronged investment strategy, buying foreign fixed-income securities, U.S. Treasury bonds and mortgage-backed securities, and high-yield corporate bonds.

Company executives say the approach takes advantage of fluctuations in three distinct markets to maximize yield.

Hedging Strategy

"Even an unsophisticated buyer understands that diversification lowers risk," said Maryann Bruce, senior vice president for financial institution sales. "Our goal is to invest so that good performance in one sector offsets weak performance in another."

Last year the Strategic Income Fund posted a total return of more than 9%.

Since its inception in October 1989 the fund has grown to $2.7 billion. Last year, sales of the fund through banks hit $128 million, accounting for 44% of the fund's total sales.

Nuveen

Last year, bank customers plowed more than $ 100 million into the Nuveen Municipal Bond Fund -- the flagship fund at John Nuveen & Co., which specializes in selling fixed-income, tax-exempt investments.

The fund, with $2.6 billion in assets, has become Nuveen's most popular with bank customers precisely because it is safe and conservative, according to Jerome Contro, a senior vice president at the company.

The portfolio boasts low volatility and strong credit quality. The securities in the fund carry an average investment rating of double-A.

Low-Yield Blues

Nuveen, which manages $62 billion in assets, has promoted the municipal bond fund as a good choice for customers who are unhappy with the low yields on bank certificates of deposit, Mr. Contro said.

"Making the transition from owning a CD, which in essence is a bond, to buying a mutual fund made up of bonds is a relatively simple psychological leap," he said.

Kemper

Plain vanilla is what sells at Kemper Financial Services Inc.

The Chicago-based company's best-sellers through banks are a municipal bond fund and a government securities fund, with total assets of $3.6 billion and $7 billion.

Banks accounted for about a third of each of the two funds' sales, according to Whitfield C. Wannamaker, senior vice president for financial institution sales at Kemper. The company manages $71 billion in mutual fund assets.

The government securities fund posted a 4.61% return in 1992 and a 17.25% return in 199 1. The municipal bond fund had an 8.71% in 1992 and 12.78% in 199 1.

Equity Funds More Popular

Though bank customers have been chiefly interested in fixed-income funds, Mr. Wannamaker said he sees growing interest in equity funds and in balanced portfolios -- those that hold a mixture of stocks and bonds.

For example, he said, demand is growing for Kemper's Retirement Fund, which is invested half in equities and half in U.S. government zero-coupon bonds.

"It's a perfect stepping stone to a greater commitment to equities," Mr. Wannamaker said.

Massachusetts Financial

Balance is the watchword at Boston-based Massachusetts Financial Services Co., which has had big success with the MFS Total Return Fund.

The fund, which emphasizes capital preservation while producing a steady income stream, invests in stocks, bonds, and money market funds. Bank customers account for 30% of the sales of the fund, which has $1.3 billion in assets.

"Bank customers demand predictability, and we found that a balanced fund meets their needs," said Jeremiah Potts, senior vice president at MFS.

20% to 60% in Stocks

Fund manager Richard Dahlberg invests between 20% and 60% of the fund's assets in equities, depending on how the market is performing.

He favors "value stocks," which he defines as securities that are priced low relative to book value and that pay steady dividends.

Last year the MFS Total Return Fund produced more than a 10% return. It has returned 13.3% annually on average over the past five years.

Fidelity

One of Fidelity Investments' top-sellng funds through banks is a portfolio that isn't even targeted to bank customers: the Fidelity Contra Fund.

The fund seeks out companies that are undergoing changes and are poised for a turnaround.

Customers seem to be asking for the Contra Fund in part because it has received favorable notices in financial publications, Fidelity executives said. In May, Lipper Analytical Services rated it No. 19 out of 313 growth funds on the market.

Boston-based Fidelity, the titan of the mutual fund industry with more than $200 billion in assets, also has several strong sellers in its Advisor lineup of funds. The Advisor funds are sold exclusively through financial intermediaries, such as banks and financial planners.

Companies with Potential

The Advisor Income and Growth Opportunities Fund is the leader. Typically, about 65% of the securities in the portfolio are invested in companies with long-term growth potential. Last year, the fund returned 15.15%, and it has averaged 15.96% over the past five years.

"Bank customers are interested in buying equity funds," said Nishan Vartabedian, executive vice president of Fidelity's Bank Services Division. "I think the message of diversification is getting across."

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