In an effort to keep investors whole and prevent a run on a big money market mutual fund they administer, Salomon Brothers and First National Bank of Chicago have injected $1.7 million in Institutional Liquid Assets, a fund aimed at institutional investors such as pension funds and bank trust departments.

In recent weeks, investors have been cashing in their shares in the government securities portfolio of ILA (the fund also has a portfolio in nongovernment money market securities that is not affected), because yields were much lower than could be obtained at other institutionally oriented funds or by investing directly in government securities such as Treasury bills.

The problem at ILA occurred because interest rates have skyrocketed since late July and the fund did not sell its lower-yielding assets quickly enough and reinvest in higher-interest securities.

For example, while other funds are yielding close to 10 percent, and Treasury bills themselves are more than 11 percent, ILA yields were less than 8 percent last week.

During September, the fund's investors cashed in more than $400 million of their shares, dropping the fund's size from slightly more than $1.4 billion to less than $1 billion.

According to a filing with the Securities and Exchange Commission, Salomon Brothers, the giant investment banking house, bought $228.5 million of securities from ILA at a price $700,000 above what the securities were worth on the open market. First Chicago returned $1 million of advisory fees to ILA that the fund used to offset losses it faced in a Monday sale of $215.4 million of securities.

Salomon Brothers has nothing to do with the investment part of the fund's operation. It administers the paperwork side, while First Chicago determines what investments the fund should make.

"The problem they're into is a result of a misjudgment on the part of the investment adviser," First National Bank of Chicago, according to William E. Donoghue, who publishes Donoghue's Money Market Fund Report.

He noted that last week the average maturity of the ILA portfolio was 75 days, while that of its major competitor, the larger Trust for U.S. Government Securities, was 58 days.

The fund used the money it received from selling the $443.9 million of securities to boost the yield on its investments. All of the money was put into overnight repurchase agreements, a technical money market maneuver. By getting rid of its low-yielding paper and putting the new cash into higher-return investments, the fund is now returning 9.94 percent.

Salomon Brothers and First Chicago also have agreed to waive the fees they charge the fund -- Salomon Brothers gets 0.2 percent of the fund's average daily net assets, and First Chicago gets 0.15 percent -- a move that automatically boosts the yield by 0.35 of a percentage point.

Furthermore, Salomon Brothers also has guaranteed that it will buy further securities at a loss from the fund if need be and has backed that guarantee with a letter of credit from Morgan Guaranty Trust Co.

The problems the fund faced were due in part to the peculiar way it values its shares, a method demanded by institutional investors who do not want to take a chance that the principal they have invested will erode.

Most money market funds recalculate the value of a share each day based on the market value of its securities.

ILA uses another approach which spreads the discount it gets from the face value of a security at purchase over the life of the security.

The Securities and Exchange Commission has told funds using this valuation method that they should consider going to a "mark-to-market" approach if the fund's per-share value drops to less than 99 1/2 cents on the dollar when the fund's assets are valued at current price.

By last Tuesday, ILA value on a market basis was just below 99 1/2 cents, and investors, afraid that the fund's trustees would have to switch valuation techniques, accelerated their withdrawals.

Salomon Brothers and First Chicago have taken steps to insure that the fund's asset value stays above 99 1/2 cents a share and that yields climb to competitive levels.

Analysts stressed that at no time were investors in the fund in danger of losing their money and that the investments, if held to maturity, would have allowed the fund to return to a $1 value per share.

In the worst case, however -- that of the "last man out" -- if the fund never shifted to a market-value technique, the last investor to cash in not only would absorb the loss on his portion of the investment but on all investors who got out earlier for the $1 a share.