As most mutual fund companies watch their sales through banks wither, business is blossoming for a small firm led by market strategist Martin Zweig.

Zweig Securities Corp., New York, recently snared places on the "preferred lists" of mutual funds sold by brokers at Bank of New York Co. and Chase Manhattan Corp.

And next month, the company expects to sign sales agreements with the brokerage units of a major bank in New York and another in New Jersey, according to Gerard T. Morda, a senior vice president of Zweig.

The company, which distributes a $2 billion-asset mutual fund family managed by a sister firm, Zweig/Glaser Advisers, is reaping the rewards of a marketing push it began in late 1992, said Mr. Morda. He is overseeing the bank sales effort from Boulder, Colo.

It probably doesn't hurt that Mr. Zweig, chairman of both firms, is familiar to many investors as a regular panelist on the PBS television network's "Wall Street Week with Louis Rukeyser."

Still, Zweig Securities is clearly swimming against the tide. Fund distributors face tough competition for shelf space at banks, which are aggressively trimming their short lists of mutual funds, said Joy Montgomery, president of Money Marketing Initiatives, Morristown, N.J.

"It used to be, banks would take a fund family and everything it offered. Now many are more discriminating," she said.

But the rocky markets that have spooked investors and dampened sales for many fund companies could be helping Zweig round up clients.

That's because the company emphasizes an investment style calculated to appeal to risk-averse customers: Several of its funds can shift wholly to cash holdings when markets turn rough.

"That doesn't eliminate risk, but it reduces risk during bad markets," Mr. Morda said in a telephone interview.

Zweig's two largest funds - the Strategy Fund, which invests chiefly in stocks of large companies, and the Managed Assets Fund, an asset-allocation portfolio - promote their ability to make a pure play on cash as a plus for wary investors.

The Strategy Fund carries a risk rating of 3 from Morningstar Inc. - smack in the middle of the Chicago company's five-point scale for measuring volatility. Morningstar has not yet assigned a risk rating to the Managed Assets Fund.

At Dec. 31, the funds had assets of $731 million and $725 million, respectively.

Ms. Montgomery said Zweig's pitch should play well with bankers. A fund company's "first sale is to the people who run the bank programs, and bankers believe their customers are more risk averse" than other investors, she said.

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