UPDATE 2-Fund firm Liontrust eyes recovery as clients return

* Assets under management currently 1.25 bln stg

* Net inflows 41 mln stg this financial year

* H1 adjusted pretax loss 1.6 mln stg; shares down 4.3 pct

* Broker recommendation after Gartmore troubles helps sales

* Performance fees 199,000 stg vs 2.2 mln stg year ago

(Adds CEO comments, detail)

By Laurence Fletcher

LONDON, Nov 24 (Reuters) - Asset manager Liontrust (LIO.L), trying to recover from the loss of two star managers last year, said on Wednesday it had won back clients over the last two months, helped by strong returns from its funds. The firm has had 76 million pounds ($120.2 million) of net inflows since the start of October, lifting its assets under management 10 percent to 1.25 billion pounds.

Last year Liontrust had lost Jeremy Lang and William Pattisson, who ran most of its assets.

The firm said two months ago it had enjoyed its first quarter of net client inflows for more than two years in the three months to September and said the business had stabilized. [ID:nLDE68S07L]

"There's nothing that doesn't lead me to believe flows won't continue in that way," Chief Executive John Ions told Reuters in an interview. "There's still a long way to go but the early signs are promising."

At 0930 GMT Liontrust's shares, which have outperformed the FTSE All Share .FTAS by 12 percent over the past month, were down 4.3 percent at 90 pence in low volumes.

Altium analyst Iain Staples said he now expects the group to return to profit in the year to March 2013 rather than in the previous year, based on Liontrust's higher marketing spend and his estimates of staff costs and sales.

Liontrusts's inflows were helped by strong performance from its funds in recent months and also by broker Hargreaves Lansdown's (HRGV.L) recommendation that investors in Gartmore European Absolute Return fund could consider Liontrust's European Absolute Return fund.

Hargreaves' advice followed news of the departure of star manager Roger Guy from Gartmore, another firm hit by so-called 'key-manager' risk. [ID:nLDE6A70K3]

Liontrust reported an adjusted pretax loss of 1.6 million pounds for the six months to September, compared with a 700,000 pound profit a year ago.

This reflected lower assets under management than a year ago and a drop in performance fees. The firm also paid out 665,000 pounds in relation to the departure of former CEO Nigel Legge. [ID:nLDE64608E]

Ions said Liontrust was interested in hiring teams focused on emerging markets, Asia and multi-asset investing, and would also consider acquisitions, although he is wary of prices being paid in the recent M&A boom in the sector.

"I wonder if certain people are purchasing businesses at the moment at too high a price," he said. "The Templeton deal with Rensburg was an unbelievably rich price." [ID:nLDE6AH0KG] (To read the Reuters Funds Blog click on blogs.reuters.com/fundshub; for the Global Investing Blog click here) ($1=.6323 Pound)