UPDATE 2-Jupiter sharply higher on market debut

* Jupiter trading at 189p

* IPO was priced at 165p

* Second time Jupiter lists in London

(Adds background, analyst comment)

By Chris Vellacott

LONDON, June 21 (Reuters) - British fund manager Jupiter (JUP.L) returned to the London stock exchange on Monday, riding buoyant markets to debut 15 percent over the price set in an initial public offer (IPO) last week.

Jupiter raised 220 million pounds ($326.3 million) to pay off debt and secured a 33.5 million pound windfall for its current owners in its IPO, which priced at 165p pence. [ID:nLDE65A19F]

By 0836 GMT, the shares were changing hands at 189 pence, after already rising above that level in grey market trading last week. The FTSE All Share .FTAS was up about 1 percent.

Ahead of Monday's debut, one head of UK equities at a large fund firm said Jupiter's pricing had been "reasonable".

"Given the market conditions, we can expect an uplift to the offer price," he had said after the valuation was announced last Wednesday.

However, some analysts warned the shares may start to pare gains as short term investors who bought into the IPO take profits.

Keith Baird, analyst at Oriel Securities, cautioned the shares were starting to look expensive given risks such as Jupiter's concentration in the British retail investment market and heavy exposure to UK equities.

"There are risks in the business ... The long term investors are not going to take profits but maybe some retail investors who got in at 165 pence may want to flip it," he said.

Jupiter has around 21.1 billion pounds under management with 4.5 billion pounds allocated to the UK Income investment theme.

<---------------------------------------------------------- For a FACTBOX on Jupiter click [ID:nLDE65A0ZB] For profiles of fund managers Philip Gibbs and Guy de Blonay, click [ID:nLDE60B26R] and [ID:nLDE65A0JN] ----------------------------------------------------------->

Jupiter's flotation marks its second outing on the London market, after it first listed in 1991 before being taken private in 1995 when it was bought by Commerzbank.

Ownership passed to staff in a management buyout backed by private equity firm TA Associates in 2007, and a motive behind last week's IPO was to refinance the debt issued as part of the transaction.

The sale, led by Bank of America Merrill Lynch and JP Morgan Cazenove, will mark a welcome boost to the UK IPO market, encouraging other companies to seek listings.

Last week British online grocer Ocado emerged as a willing candidate for a flotation aiming to raise about 200 million pounds in an IPO next month. [ID:nLDE65F1B4]

Jupiter's IPO priced towards the bottom of its original 150-210 pence price range having been dogged throughout the bookbuild by choppy markets, but closed more than 2.5 times covered.

Private equity backer TA Associates now holds around 22 percent of the company, a stake worth around 168 million pounds at the offer price.

Senior staff banking large windfalls from selling shares in the IPO include fund managers Tony Nutt and Philip Gibbs who sold shares amounting to around 5.7 million pounds and 4.1 million pounds respectively.

Chief executive Edward Bonham-Carter, brother to actress Helena Bonham-Carter, sold shares worth 3.5 million pounds. ($1=.6743 Pound) (Editing by Joel Dimmock and Jon Loades-Carter) (For the Funds Hub blog: blogs.reuters.com/hedgehub) (For Global Investing: here)