UPDATE 2-Waddell & Reed Q3 profit tops market; shrs hit yr-high

* Q3 EPS, ex items, $0.37 vs estimate $0.33 * Books profit in investments

* AUM up 16 pct since end of Q2

* Says headcount to grow next year * Shares up 6 pct to touch new year-high (Recasts; Adds conference call details, analysts' comments, background, updates share movement)

By Anurag Kotoky BANGALORE, Oct 27 (Reuters) - U.S. asset manager Waddell & Reed Financial (WDR.N) posted a quarterly profit that beat analysts' estimates and said assets under management grew to a level just 8 percent below their all-time high, as rising risk appetite among investors boosted inflows.

The company, which opted to cut compensation expenses through a voluntary separation program late last year, said it expects headcount to grow next year.

Waddell & Reed also does not see a need to go for partnerships with other companies to gain more market share, a company official said on a conference call.

Shares of Waddell & Reed gained as much as 6 percent to reach a new 52-week high of $31.47 Tuesday.

S&P Equity Research said the company's adviser and wholesale channels should continue to see strong flows, and margins are likely to be helped by improving underwriting and distribution.

S&P raised its price target on Waddell stock by $2 to $34.

Citigroup analyst Keith Walsh said organic growth at the company remains the best among its peers.

Waddell and Reed said net flows for the third quarter was $2.43 billion, compared with $1.33 billion for the same period a year ago.

Fund flows measure the ability of asset managers to draw in more assets, which in turn determines profitability. Coupled with steep market declines, last year's huge outflows led to massive spending cuts and layoffs at many firms.

For the third quarter, the company's net income remained flat at $33.4 million, or 39 cents a share. However, excluding charges and tax benefits, the company earned 37 cents a share for the quarter.

Analysts were looking for a profit of 33 cents a share, excluding items, according to Thomson Reuters I/B/E/S.

Assets under management at the end of the quarter was $64.49 billion, compared with $55.61 billion at the end of the second quarter. Asset managers generate the bulk of their revenue on fee income based on a percentage of assets under management.

Assets under management touched an all-time high of $70 billion at the end of June 2008. Waddell & Reed said investments and other income for the period was $2.3 million, compared with a loss of $530,000 in the year-ago quarter.