UPDATE 3-Baer GAM outflows slow sharply in H1

* Net inflows in private banking 3.8 bln Sfr

* Net outflows from hedge fund arm GAM 0.5 bln Sfr

* Consolidated net profit 324 mln Sfr, down 37 pct

* Says outflows at GAM slowed substantially by mid-yr

* Shares up 1.3 pct

(Adds comments by executives, analysts)

By Lisa Jucca

ZURICH, July 27 (Reuters) - Julius Baer (BAER.VX) said first-half outflows at its GAM hedge funds arm slowed sharply as investor withdrawals fell substantially by mid-year, sparking optimism about its future performance and lifting shares.

Switzerland's third-biggest asset manager said outflows at the future GAM Holding, that it wants to list separately from its private bank, were 0.5 billion Swiss francs ($467 million), down from 24.5 billion in the second half of 2008, when the unit was hit hard by the financial crisis.

David Solo, who oversees GAM's operations at Julius Baer, said the larger asset management withdrawals at the beginning of the year were "an extension of last year's panic". It was mainly private clients who pulled the funds, while institutional investors proved more resilient, Solo said. Julius Baer attracted 3.8 billion Swiss francs of net new client money at its cash-generating private banking arm despite concerns about global pressure by the G20 on Switzerland to open up its banking secrecy laws, helping assets under management rise 9 percent to 299 billion francs.

"At first glance these are relatively solid numbers," Wegelin analysts said in a research note. "Gratifying are the inflows into the future Julius Baer Group, the lower costs and the solid Tier 1 ratio."

Julius Baer did not give a business outlook. Julius Baer Group Chief Executive Boris Collardi reiterated at a news conference that the bank, with its strong capital base, would continue its search for acquisitions.

Shares in Julius Baer were up 1.3 percent at 48.86 Swiss francs at 0946 GMT outperforming the DJ Stoxx European banking index .SX7P which was up 0.57 percent.

The bank said it made a net profit of 324 million Swiss francs, down 37 percent from the previous year, but beating an average forecast of 284 million Swiss francs in a Reuters poll of analysts. The analysts had expected the bank to attract 5.8 billion Swiss francs of new client wealth.

FOCUS ON PRIVATE BANKING

Julius Baer Chief Financial Officer Dieter Henkelmann said private banking inflows had been "even" throughout the first six months of the year and that clients were still reluctant to move into equities.

"Private banking clients are still heavily in cash," he said. "There has been a move from treasury bonds into corporate bonds, otherwise clients are still pretty risk averse."

He added that the bank saw no impact on client flows from the ongoing global crackdown on tax evasion that has forced Switzerland to make concessions on its treasured bank secrecy. [ID:nNL9712182]

Kepler Capital Markets analyst Methias Bueeler said the higher than expected net profit was due to an "unsustainable" fall in its effective tax rate to 17 percent from 22 percent.

The bank said its Tier 1 ratio, a measure of a bank's capital strength, increased to 16.7 percent from 13.6 percent at the end of 2008.

Baer said its pro-forma net profit, which takes into account the planned splitting of the private bank from the asset management division, was 246 million Swiss francs at the new Julius Baer Group and 78 million Swiss francs at GAM Holding.

Julius Baer announced in May it would split its private bank and asset management operations into two listed units -- Julius Baer Group and GAM Holding -- a move investors welcomed as it would shield it from struggling hedge fund GAM. [ID:nLK568689]

Julius Baer reiterated it is still aiming to list separately its U.S. asset management unit Artio this year. The CFO said this could come as early as the third quarter. ($1=1.071 Swiss Francs) (Additional reporting by Rupert Pretterklieber; Editing by Mike Nesbit)