* Pretax profit 206.2 mln stg vs consensus of 198.1 mln
* Buoyed by 20 mln pounds in FX gains
* Shares down 6.9 pct as inflows underwhelm, fee margin dips (Adds detail from statement, CFO call, share reaction, analyst reaction, background)
LONDON, Sept 7 (Reuters) - Emerging markets-focused asset manager Ashmore reported a return to net inflows for the first time since 2013 on Thursday, although client demand and underlying profit growth lagged expectations and sent its shares lower.
After a long period of underperformance on concerns about the economic outlook, many emerging markets have posted double-digit returns over the last year as sentiment improved, prompting Ashmore's stock to outperform developed market peers.
Net inflows of $1.9 billion in the year to the end of June showed demand was proving slow to return.
"In order to justify this valuation, organic growth would need to increase from the current levels," said KBW analyst Jonathan Richards in a note to clients.
Added to market gains over the period of $4.2 billion, total assets across Ashmore's range of equity, debt and alternative asset funds ended the year up 12 percent at $58.7 billion.
Asset gains helped revenues rise 11 percent and drove a 23 percent increase in pretax profit to 206.2 million pounds ($269.3 million), beating consensus expectations. However, the performance was helped by 20 million pounds in currency gains that masked slower underlying growth, said KBW's Richards.
"Barring this, results would have been below expectations," he said. "We do not see significant upside in the shares over the next 12 months," he added, keeping a 'market perform' rating and 355 pence price target on the stock.
At 0850 GMT, shares in Ashmore were down 5.8 percent at 344p, leading fallers on the mid-cap index.
EMERGING MARKETS NEGLECTED
Adding to the subdued tone, UBS analyst Michael Werner also pointed to lower-than-expected management fees of 221.6 million pounds, after the fee margin dipped to 50 basis points in the second half of the year.
The margin was pressured after the company won investment mandates from institutional clients at lower fee levels.
The typical investor remains under-represented in emerging market assets at around five percent compared with a neutral weighting based on the size of the market of some 20 percent, Chief Financial Officer Tom Shippey said.
The reluctance to reallocate more money to emerging markets comes despite Ashmore's funds performing strongly, with 91 percent of assets outperforming their benchmark over one year, 86 percent over three years and 87 percent over five years.
With "substantial absolute and relative value" remaining across emerging markets, Chief Executive Mark Coombs said the company was well-positioned for growth in the coming year.
"Ashmore's focused strategy means it is in a strong position to continue to deliver superior investment performance and to benefit as investors raise their allocations to Emerging Markets from underweight levels." ($1 = 0.7657 pounds) (Reporting by Simon Jessop; Editing by Rachel Armstrong/Keith Weir)