UPDATE 1-Hargreaves Lansdown profit up 42 pct, assets rise

(Adds CEO comments, details)

By Olesya Dmitracova

LONDON, Aug 27 (Reuters) - UK investment manager Hargreaves Lansdown (HRGV.L) said on Wednesday its full-year operating profit rose 42 percent, boosted by rising client assets and higher margins, but it said markets would remain challenging.

Operating profit rose to 57.8 million pounds ($106.7 million) in the year to end-June, above an average 55.9 million pounds forecast by four analysts, according to Reuters Estimates.

Assets under administration grew 9 percent to 11.1 billion pounds, helping boost revenues 22 percent to 120.3 million pounds, the group said on Wednesday.

There was no equivalent rise in costs, so its operating margin increased to 48 percent from 41 percent last year.

"We expect market conditions to remain challenging, but our aim will be to emerge with an increased presence in the market," Chief Executive Peter Hargreaves said in a statement.

"(People) don't buy investments if they think the prices are going down; why would you?" he later told Reuters in an interview.

Investor confidence has been below the median for the past eight to nine months, according to the company's own survey of investors, Hargreaves said.

For that to improve, "we have to see the light at the end of the tunnel for our economy", he said. "The economy is in the worst state it's been for 20 years."

Hargreaves Lansdown shares were flat at 161 pence at 0732 GMT. The stock made its debut on the London Stock Exchange in May last year at 160 pence.

Hargreaves Lansdown hopes its revenue will be lifted by continued growth in the pensions market, as well as transfer of money invested in life assurance companies, Hargreaves said.

The investment manager increased its headcount by 6 percent, mainly from retaining graduates hired on a temporary basis, at a time when many financial companies are cutting jobs.

Founded in 1981 by Hargreaves and Chairman Stephen Lansdown, the Bristol-based company manages assets on behalf of more than 350,000 clients.

Its businesses include a fund supermarket, financial advice and stockbroking services.

Hargreaves Lansdown said Adam Norris had resigned as managing director of the advisory and corporate business to pursue other interest outside of the financial services. (Editing by Will Waterman)