UPDATE 1-Bill Gates' Cascade raises stake in asset manager Gamco

(Recasts; adds details, share movement)

Oct 6 (Reuters) - Bill Gates' investment company, Cascade Investment LLC raised its stake in Gamco Investors Inc (GBL.N) through purchase of a $60 million convertible note, sending shares of the asset manager up as much as 15 percent.

Gamco, the investment group headed by billionaire Mario Gabelli, said the note offering raises Cascade's stake in Gamco to 18.9 percent from 10.4 percent.

The ten-year note, which pays interest at 6.5 percent, is convertible into the company's class A common stock at $70 per share, Gamco said.

Earlier in February, Cascade had reduced its stake in Gamco to 10.3 percent from $11.1 percent.

The company said Cascade's latest investment will help financing of a variety of its initiatives, particularly its focus on the alternative investments business.

Gamco's Gold Fund, the Asset Fund and the Utilities Fund had outperformed the benchmark Standard & Poor's 500 Index .SPX, in 2007.

Shares of Rye, New York-based Gamco, the second-highest gainer on the New York Stock Exchange, were trading up $6.82 at $55.15 on Monday. (Reporting by Anurag Kotoky in Bangalore, Editing by Dinesh Nair)