Boston may be the birthplace of the traditional mutual fund, but Silicon Valley is quickly becoming known for a different kind of fund. Funds of Palo Alto, Calif. is creating three funds - two index funds and a money market fund - that will be both sold and serviced exclusively through the Web, according to a June SEC filing. will not be the first company to introduce such funds. But, it is the latest to do so and its plans may indicate that so-called electronic mutual fund shares, shares which require investors to receive all mailings electronically in return for lower fees, are marketable products and not just novel ideas. And these products are being developed in Silicon Valley, thousands of miles away from the traditional East Coast centers of mutual fund activity in Boston and New York.

The first to introduce such a product, E*Trade, also of Palo Alto, brought out its S&P 500 index fund in February. It now has $23 million under management. E*Trade currently has in registration with the SEC three more such funds. Another Internet company, of Menlo Park, Calif., filed with the SEC in May to create its own actively-managed fund that is also sold and serviced exclusively over the Internet. is following E*Trade's lead and creating an S&P 500 index fund and is even using the same sub-adviser, Barclay's Global Fund Advisor of San Francisco. But it is also creating a bond index and a money market fund. has also set up a money manager, Asset Management of Palo Alto.

The funds will be sold through an online bank that is establishing. E*Trade itself just announced plans to buy an online bank, Telebanc Financial Corp. of Arlington, Va., but E*Trade officials said they did not know how that might affect mutual fund sales.

The website is now merely serving as a billboard and does not mention specific products. But the site says will begin offering banking, investing, borrowing and insurance services in the fourth quarter of this year. officials did not return calls seeking comment. However, the site posts biographies of senior executives at the company. They include Elon Mustk, chairman and chief executive officer, who founded the Internet company Zip2 Corp. of Mountainview, Calif., in 1995. In February, he sold the company to Compaq Computer Corp. of Houston for over $300 million. Another executive, Harris Fricker, who is president and chief operating officer, most recently was senior vice president and director at Dundee Securities in Toronto, Ont. Both men worked at the Bank of Nova Scotia, according to their biographies. Fricker is listed as president of the funds in the SEC filing.

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