stock by a Swiss investor ZURICH (Reuters) - Some banks may be thrilled when Beat Wittmann, chief investment officer at the Swiss private bank Clariden, comes to call. Others may prefer to lock the doors.

Wittmann oversees an investment vehicle called Aramus, which uses a "long-short'' strategy, meaning it buys banks it sees as under-valued -- going long -- while "shorting'' those it regards as over-valued.

Shorting a stock means essentially selling what one does not yet own, in the belief the price will fall. Hence, the desire to find those that Wittmann calls the banking industry's ''dinosaurs'', institutions whose shares may be trading well above where he thinks they should be.

The long-short strategy, though common for hedge funds, is unusual for an investment product specialising in banks.

But given banking's cyclical nature, Wittmann said the strategy makes sense, especially now. He sees "a kind of sweet spot'' as declining interest rates, coupled with the mounting costs of new technology, and the forces of deregulation, create winners and losers in the industry.

"The introduction of competition has created winners and losers,'' said Wittmann, adding such a scenario "is ideally suited to a long-short vehicle''.

Aramus doesn't disclose short positions, but Mark Lynch, one of its advisors at the US-based Wellington Management Company, said it was hard to make money from short positions last year because many were in dollar-denominated shares, meaning at least some shorts were probably held in US banks.

As to the Europeans, Lynch says Deutsche Bank is probably "the best example of a dinosaur changing, evolving and turning itself into a viable capital markets player''.

Wittmann says Deutsche's decision to restructure its business along two clear lines -- investment banking, and asset management -- was positive, adding that it "has the critical mass'' to succeed, if it can work out details of its strategy.

Lynch is less positive for Dresdner AG and Commerzbank AG, adding "the real difficulty is political, and countries have to make the decision how many banks they want to have left''.

That is not just important for Europe. Lynch says New Zealand "has no local bank left, except for one small local savings bank,'' Taranaki, a regional bank owned by a community trust.

"That is one end (of the spectrum). The other end is Australia, where you don't let any banks in; you don't let any foreigners in; you don't let any banks merge. And you end up with banks that are too small to compete globally,'' he said.

Aramus's return based on net asset value (NAV) to March 15 from last April when it first opened to investors is 42 percent.

Lynch said Aramus already tested its strategy early last year before taking investors' money.

"We were running a paper portfolio from January 1 to April 1 and we made our beginner's mistakes then,'' he said.

Pacific Century Financial Corp, the holding company for Bank of Hawaii, was one long position that didn't work out, at least initially.

"Banks normally trade in a fairly tight range in the US, and then there'd be Bank of Hawaii three standard deviations down. You had to expand the chart to keep it on there.

"So, we bought a lot,'' he said, adding that the US market "is very eager to award current success and penalise current failure, and doesn't really look at what we think is underlying value....'' But, Lynch says Aramus hasn't reduced its position on Pacific Century. Since October, the shares have bounced from a low of about $11 to roughly $20, which is above the average cost Aramus paid to acquire them. Pacific Century closed on March 15 at $19.62.

Many of Aramus's positions are off the beaten track, thanks in part to Lynch's globe-trotting activities, which take him and a team of three other managers to 15 to 20 countries every year.

There is, for example, a long position on Bank of Bermuda.

"You have to see that in a diversified portfolio the investment manager goes into the inefficient parts of the market. This effort gets rewarded with performance. So it makes perfect sense to put Bank of Bermuda there,'' Wittmann said.

Bank of Bermuda's shareholders said on February 2 that the company has cleared the way for it to seek a listing on Nasdaq.

Lynch said that, compared to the country's banking system, Japan's finance companies were in very good shape.

While Japanese banks "still have loans popping up that were supposed to have been dealt with years ago,'' some finance companies may be better than their reputation, he said.

He likes Promise, which closed at 8,440 yen on March 16 compared with a 2000 low of 4,550 yen on January 13, 2000, and a high of 9,500 on June 2, 2000.

Aramus is classed as an "investment firm'' under Swiss law, but works like a closed-end fund, denominated in Swiss francs. Clariden, a private bank wholly-owned by Credit Suisse Group may list Aramus on the Swiss exchange later this year.