* Assets under management $40.5 billion at end-September
* Declines comment on October client flows
* AHL rebounds, nears high-water mark
* Shares up 8 percent
(Adds analysts, detail)
By Laurence Fletcher
LONDON, Nov 4 (Reuters) - Man Group saw client assets rebound more strongly than expected, boosting its shares and raising the prospect that the world's largest listed hedge fund company can finally start winning back investors.
Man -- which has just bought smaller rival GLG with its $25 billion of assets to become less reliant on computer-driven funds -- said it ran $40.5 billion at the end of September, $1 billion more than an earlier forecast.
Stronger returns from Man's flagship fund AHL have driven the recovery. AHL, the $21.9-billion fund that latches onto trends in global futures markets, is named after 1980s founders Michael Adam, David Harding and Martin Lueck.
"Once a product is performing, people want to put money into it," said one analyst who expects Man's net inflows to turn positive on the back of AHL's better returns. "Exactly when that happens is the challenge," said the analyst, who asked not to be named.
But Man declined to say whether October marked a turnaround in outflows after clients pulled out money for the eighth straight quarter in the three months to end-September, even as the wider industry has started to win back clients.
The shares were up 8.1 percent at 274 pence at 0949 GMT, having underperformed the FTSE All-Share index by 24 percent so far this year. Assets under management are still barely half the amount in the summer of 2008.
AHL REVIVAL
AHL, which plunged 16 percent last year, is up around 15 percent so far this year to end-October, profiting from trends in bond and currency markets.
This is ahead of a 4.3-percent gain in the FTSE 100 index, while the average hedge fund is up 4.8 percent to the end of September, according to Hedge Fund Research.
The gains mean that, on average, AHL is just 2-3 percent below its so-called high-water mark, the level above which it can earn lucrative performance fees. Performance is likely to have been boosted after new algorithms were added to help it cope with choppy markets, while the fund has also reduced reliance on its traditional strategy of following market momentum.
Man said earlier that client outflows -- institutional as well as private investor money -- in the three months to Sept. 30 were $600 million.
The firm also said pretax profit for the six months to September before adjusting items was $227 million, above the $215 million it forecast in September.
"Overall (it's) a robust set of results," said analysts at Citi in a note, although an apparent slowdown in sales at GLG was "a slight disappointment".
Last week a source familiar with the matter told Reuters the firm was planning redundancies that could number 180-200 following its $1.6 billion purchase of GLG. Clarke declined to comment on this number on Thursday, but said that cost savings were "on track".
Clarke also played down recent takeover speculation that has surrounded the group, saying it had "no need for a strong distribution partner and no need of a big brother to help us achieve our objectives".
Clarke also confirmed plans to launch a fund next year that combines AHL with GLG's Global Opportunities fund.
(Editing by Jane Merriman and Douwe Miedema)