By Simon Jessop
LONDON (Reuters) - Emerging markets-focused fund manager Ashmore Group (L:ASHM) saw quarterly net inflows for the first time in nearly three years in the three months to the end of March, helping to drive a 7 percent rise in its total assets.
Out of favour for years amid concerns over growth, emerging markets are starting to lure in investors again, given cheap valuations when compared with developed markets and a more positive economic outlook.
Ashmore said on Tuesday total assets at the end of the period - its fiscal third quarter - were $55.9 billion (£44.50 billion), up 7 percent on the prior quarter, after a $2.3 billion uplift from positive market movements and after clients added a net $1.4 billion in new capital to its funds.
Its shares were down 0.4 percent at 0813 GMT in a flat mid-cap market. The stock has risen 35 percent from November lows as investors started to bake-in the broader market recovery.
Shore Capital analyst Paul McGinnis said the strong share price performance was reason to keep his valuation at 'hold' for now, although he was positive on the outlook.
"Even with flat markets in Ashmore's final quarter, we would expect a Q4 net flows figure in excess of $1 billion and therefore see scope to push up our full year AuM [assets under management] forecast," he wrote in a note to clients.
Ashmore said clients had added more money to its overlay/liquidity, local currency, external debt and corporate debt strategies, while flows into equities and alternatives were flat.
The company's blended debt and multi-asset strategies saw net outflows over the period, it added.
"Ashmore delivered the anticipated return to net inflows this quarter, generated from a diverse range of existing and new clients," Chief Executive Mark Coombs said in a statement.
"The outperformance of Emerging Markets reflects accelerating economic growth and attractive absolute and relative valuations across Emerging Markets equity and fixed income markets. This increases the pressure on investors to address their underweight allocations."
After gains of nearly 10 percent last year and more than 11 percent year-to-date, emerging markets <.TRXFLDGEPU> are expected to rise further this year as investors turn away from more richly valued markets, such as in the United States.
A poll of analysts in March suggested developed market equity markets could face a correction of 10 percent or more in 2017.