Funds hope to be top dog in IRAs

The mutual funds have been kept rather busy, to say the least, trying to keep up with the swelling fortunes in their money market versions. Not only have the money funds hauled in nearly $190 billion in less than eight years, they have introduced millions of people to mutual funds who had never heard of them before.

Now, the funds have been given another way to boost their assets and their prominence in the public eye. By making individual retirement accounts (IRAs) available to all income-earners as of the first of the year, Congress set off a new wave of competition for what could add up to more than $50 billion in personal retirement savings accounts.

Banks, savings-and-loan institutions, and insurance companies have been playing their IRA tunes like the Big Bands of the financial world, running bold newspaper ads touting high returns and holding out the prospect of making millionaires out of IRA depositors. The mutual funds, meanwhile, have been keeping their promotional volume somewhat lower, for the time being.

But it is the mutual funds, many financial experts believe, that will reap the greatest share of the IRA windfall. While other investment and savings vehicles are expected to gather a majority of IRA accounts, mutual funds alone should pick up about a third of them, adding at least $16 billion of long-term deposits to their coffers.

Even though IRAs have been available to everyone for only a month, mutual fund executives already see the new accounts as a boon to their industry.

''It's been the most important plus factor for us since the money funds came along,'' said Andrew Freund, first vice-president of finance at Bache Halsey Stuart Shields Inc. Mr. Freund is also heading up Bache's IRA-mutual fund marketing effort.

That effort, as with many other mutual funds, includes contacting existing customers, trying to find new individual customers, and attempting to persuade corporations to set up payroll-deduction IRA programs for their employees.

The last strategy, and the one most funds are concentrating most of their firepower on, involves going after employee benefit departments at US businesses. Instead of pursuing the market one person at a time, many of the funds are aiming their efforts at places where they can pick up several dozen - or several hundred - employees at one shot.

''We started with the payroll deduction market because we could get going on that before 1982, to get the companies ready,'' said Deborah Foord, Foord vice-president for investments at Scudder, Stevens & Clark. ''In January, we started advertising to the individual depositors.''

''There have been a number of big full-page ads directed to the payroll deduction market,'' notes Harry Guinivan, a spokesman for the Investment Company Institute, the mutual fund trade group. ''Several funds have decided to get the companies interested in payroll deduction plans they could offer their employees.''

Under these programs, the worker never sees the money going into his IRA. It is deducted from his gross pay before he gets the paycheck and before Uncle Sam gets his share. Like any other IRA, the worker can deposit up to $2,000 a year into a mutual fund IRA. If he is married and his spouse is not working, he can put in up to $2,250. If both spouses are working, they can each put in as much as $2,000, for a total of $4,000 a year.

As the interest accumulates in the IRA, the federal government can't touch that, either, until the person takes it out for retirement, which he can do starting at age 591/2. Then, withdrawals are taxed at the prevailing rate, which should be less, assuming the person is in a lower tax bracket. Also, the additional exemption given to people over 65 makes the tax burden on IRA withdrawals after that age even less.

If the tax sheltering advantages of an IRA are not enough to get people to open one of these accounts, mutual fund executives like to point out a few incentives of their own:

* Flexibility. If the IRA is with a mutual fund firm that has several individual funds, the shareholder can move the money from one fund to another as often as he likes. It all depends on what he thinks is the best place for it at any given time. If stocks look better than bonds, all or part of the IRA account can be shifted to stocks - all done with a phone call.

* Low cost. With no-load funds, particularly, the cost of opening and maintaining a mutual fund IRA ranges from nothing to $3 or $5. Similarly, there is no sales commission.

* Performance. As a class, mutual funds have paid better long-term yields than the average bank or insurance company fund.

* Portability. If the worker leaves the company, he can just keep feeding his mutual fund IRA on his own. On the other hand, if the IRA is part of a qualified pension plan, the worker would have to take the cash out and open a new IRA account. Switching IRAs can be done once a year without penalty. Investors, however, can still move their money from fund to fund within an investment company as often as they like.

For the near future, the money funds are expected to be one of the largest individual beneficiaries of the IRA windfall. Until people can see the comparative performance of the various funds, including growth, income, and bond funds, mutual fund officials expect most will opt for the money funds. Currently paying yields of 11 to 13 percent, these funds give people a place to ''park'' their money until they decide on a long-term strategy. And if money funds can come up with the 17 and 18 percent returns they paid last year, they may prove to be good for the long term, too.