UPDATE 2-F&C sees AUM rise in Q3, remains cautious

* AUM up 12.3 pct to 99.2 bln stg in Q3, beating forecasts

* Net outflows cut to 382 mln stg vs 2.57 bln in Q3 2008

* Share price rises 3.8 percent (Adds details, outlook)

LONDON, Oct 30 (Reuters) - F&C Asset Management (FCAM.L) saw its assets under management rise in the third quarter, mainly due to improving markets and favourable currency movements, but said it remained cautious in its outlook given the speed and extent of the market recovery.

"While we see an improvement in risk appetite from some clients, with growing interest in emerging equities and specialist sub-classes of fixed income, some of our Continental European clients continued to de-risk their portfolios during the third quarter," the fund firm said on Friday.

Assets under management were up 12.3 percent to 99.2 billion pounds ($163.1 billion) at end-September, beating analysts' forecasts, which ranged from 90.3 billion pounds at Cazenove to 97 billion pounds at Singer Capital Markets.

At 0803 GMT, shares were up 3.8 percent to 76.35 pence.

The increase was driven by a combination of favourable currency effects as some 50 percent of F&C's AUM is euro-denominated, and higher market levels.

F&C saw a 382 million pound net outflow during the quarter, compared to 2.57 billion pounds of net outflows in the same period last year. Insurance net outflows of 266 million pounds were at their lowest level since the fourth quarter of 2004.

However, the group signalled that the removal of the uncertainty over its ownership, which has hindered its institutional business, was beginning to convert into new mandates, with the greatest progress being made in liability driven investments (LDI).

F&C became fully independent with the disbursement of Friends Provident's FP.L 52 percent stake in July.

Gross inflows of new institutional business stood at 456 million pounds, consistent with the same period last year. But F&C added that it had a pipeline of unfunded new mandates in line with that disclosed at its interim results.

It added that it was in the process of launching new LDI products and that its momentum in LDI was presenting it with increased opportunities to discuss other higher fee capabilities.

Alain Grisay, chief executive of F&C, said that whilst the primary focus remains organic growth, it would continue to seek bolt-on acquisitions, where these have the potential to strengthen F&C's product offering and generate shareholder value. (Reporting by Claire Milhench; Editing by Rupert Winchester)