UPDATE 2-Schroders sees 7 bln stg net inflows, shares rise

* Pretax profit falls 19.2 percent to 57.8 million pounds

* Funds under management rise 23 percent

* Shares rise 4 percent

(Adds comments by CEO, analyst; share price)

By Raji Menon

LONDON, Nov 10 (Reuters) - UK fund firm Schroders Plc (SDR.L) attracted net inflows of 7 billion pounds ($11.7 billion) in the third quarter, its strongest performance in years and underscoring a rush by investors out of less risky but low-yielding cash holdings.

"This is definitely a turnaround for us as we haven't had net flows of this magnitude for many, many years," Chief Executive Michael Dobson told Reuters.

At 0930 GMT, shares were up nearly 4 percent at 1,185 pence, not far from a year's high of 1,211p set last month.

Profit before tax and exceptional items fell to 57.8 million pounds from 71.5 million in the previous year, Schroders said, beating an average forecast of 48.5 million from two analysts.

"The main reason for lower profits is that despite the recent rally ... market levels are still low compared to a year ago," Dobson said.

The company had also booked charges related to exceptional items of 14.2 million pounds during the quarter, Dobson said, but he was upbeat on the outlook.

"The flows that we have seen in the third quarter indicate that there is a weight of money around in both retail and institutional (markets) which will continue to come into the market as investors seek higher risk and higher return," he said.

Brokerage KBC Peel Hunt said: "Schroders is our preferred play amongst the long-only fund managers and following the interim management statement we intend to upgrade our earnings estimates for 2009 by 15 percent."

STRONG FLOWS

Some 3.3 billion pounds of Schroders' total net inflows were from its institutional business and 3.7 billion from retail.