UPDATE 2-Henderson posts 9 pct rise in assets under mgt in Q3

* Assets under management 57.7 bln pounds at end-Sept

* Sees increased client demand for its products

(Adds detail, spokesman, broker comment, share price)

By Cecilia Valente

LONDON, Oct 29 (Reuters) - Anglo-Australian fund manager Henderson Group Plc (HGGH.L) suffered client withdrawals in the third quarter, but saw its assets increase anyway thanks to the recent market rally.

The fund manager, which in April took over rival New Star, said on Thursday it had 57.7 billion pounds ($94.5 billion) under management at the end of September, up 9 percent from 53 billion three months earlier.

Two analysts polled by Reuters had expected assets under management to range between 40 billion pounds and 55 billion.

Net fund inflows were 300 million pounds in higher margin products, offset by outflows of 300 million from the lower margin fund range.

Insurers Pearl withdrew 1.2 billion pounds and has a further 1.4 billion of assets which Henderson said it had given notice on but had yet to withdraw.

Positive market and foreign exchange movements contributed 5.9 billion pounds, Henderson said, adding inflows into the combined Henderson New Star UK Wholesale business stabilised during the period.

Henderson said its institutional business had a net pipeline of about 700 million pounds in commitments consisting of fixed income, global equity and cash funds.

The new business will be partially offset by the outflow of 200 million pounds from New Star private client money expected to occur in the fourth quarter and a further 200 million net outflow from New Star institutional business that occurred in October.

CONDITIONS IMPROVE

"Conditions across most markets and asset classes have continued to improve during the period and, together with good investment performance, have led to increased client demand for our products," said Henderson Chief Executive Andrew Formica.

"Where we see other opportunities, at attractive prices, to extend our product offering and build market share, we will seek to take advantage of them," he said.

A Henderson spokesman said the group was not in a hurry. "The point we are making here is if strategy and opportunity collide, we are in the position to make good on that."

Broker Altium Securities increased its price target for the stock, which was down 3.2 percent at 129.3 by 0917 GMT, to 140 pence from 130p, but stuck by its "hold" recommendation.

Broker KBC Peel Hunt also gave Henderson a "hold" rating, pointing out the New Star acquisition "now appears superbly timed but that risks remain."

It also noted the defection announced on Tuesday of star fund manager Guy de Blonay to rival Jupiter Asset Management [JPAMG.UL]. [ID:nLR586935]

"New Star is a heavily personality-driven business and its predominately retail money could prove flighty if key names start to depart," KBC Peel Hunt analysts said.

In the wake of the credit crisis, fund management firms have grappled with lower assets under management triggered by falling markets and client redemptions, while revenues have come under pressure. A return of investor confidence is now leading to a switch away from cash and bank deposits.

On Wednesday, Prudential Plc's (PRU.L) fund arm M&G said net inflows for the third quarter were 2.5 billion pounds, a 47 percent rise year-on-year. (Editing by Raji Menon and David Holmes) ($1=.6107 Pound)