Fund firm Henderson's assets cushioned by market gains in Q1

* Q1 assets up 2.1 pct to 103.1 bln stg

* Retail net outflows 1.4 bln stg; to pay extra dividend

* Says Janus deal on track; shares up 0.6 pct (Adds details from statement, share reaction, analyst quote)

By Simon Jessop

LONDON, April 19 (Reuters) - Fund manager Henderson Group (Frankfurt: HDJ.F - news) said its assets under management rose 2.1 percent in the first quarter as market and currency gains more than offset net outflows from both retail and institutional clients.

That marked a continuation of last year's mixed trends for Henderson, which is in the middle of a $6 billion takeover of U.S. peer Janus Capital (NYSE: JNS - news) . However, the company said on Wednesday that it saw signs of improvement in fund flows towards the end of the first quarter.

It also said it had made "substantial progress" towards its takeover of Janus (Shenzhen: 300083.SZ - news) , which will be put to shareholders at a vote on April 26, and confirmed it would pay an extraordinary dividend.

Henderson's total assets at the end of March were 103.1 billion pounds ($132 billion), up from 101 billion pounds in the prior quarter, after market gains of nearly 4 billion pounds, the company said.

They helped soften the impact of net outflows from retail clients of 1.4 billion pounds and 400 million pounds from institutional clients, and Chief Executive Andrew Formica flagged a brighter outlook.

"While retail client outflows continued, we saw an improvement in client sentiment and flows as we moved towards the end of the quarter," Formica said in a statement.

The institutional outflows followed a merger-related restructuring of the firm's global equities team, he said, but the company had seen "a healthy number of mandates funding since quarter end".

Active asset managers globally are feeling the pinch of lower fees, higher regulatory costs and competition from index-tracking funds, prompting some to merge.

As well as Janus and Henderson, Standard Life (LSE: SL.L - news) and Aberdeen Asset Management (Frankfurt: 899502 - news) also recently announced a tie-up and more are expected.

After Janus paid out a first-quarter dividend to its shareholders, Henderson had said it would follow suit and on Wednesday confirmed it would pay an extraordinary dividend of 1.85 pence per share.

Shares (Berlin: DI6.BE - news) in Henderson were up 0.6 percent at 0811 GMT in a flat FTSE mid-cap index, but were still down 3.1 percent since the start of this year after losing nearly a quarter of their value last year.

Shore Capital analyst Paul McGinnis reiterated a 'buy' recommendation on the stock with a 227 pence a share price target.

"Accepting that a period of integration may keep flows depressed in 2017, we continue to regard Henderson shares as excellent value for those happy to be swapped into the U.S.-listed equivalent," McGinnis said in a note to clients.

($1 = 0.7805 pounds) (Reporting by Simon Jessop; Editing by Rachel Armstrong and Susan Fenton)