* Asset manager reports sharp outflows in Q4
* Total assets at record high, helped by FX boost
* Shares fall 2.1 pct, lag FTSE 100 index (Adds CEO comment, share price reaction, analyst comment)
By Simon Jessop
March 2 (Reuters) - British asset manager Schroders reported sharp outflows by clients in the fourth quarter, taking the gloss off forecast-beating annual profit and hitting its shares.
Clients pulled 2 billion pounds ($2.5 bln) in the final three months of 2016, which proved a tough year for many asset managers given a volatile market backdrop, with rivals Aberdeen Asset Management and Henderson Group also suffering outflows late in the year.
The scale of withdrawals surprised analysts, given consensus forecasts had been for the company to take in an extra 300 million pounds in the fourth quarter, Cenkos analyst Rae Maile said in a note to clients.
Schroders' shares were down 2.1 percent at 3,060 pence after its results announcement on Thursday. Some analysts, though, were positive on the outlook and the company lifted its full-year dividend by 7 percent after its total assets hit a record high 397.1 billion pounds, up 27 percent over 2016.
They were helped by a 42 billion pound currency boost after Britain's vote to leave the European Union sent sterling tumbling.
"Overall retail and institutional flows were negative, with the flows picture worse than expectations," KBW analyst Jonathan Richards said in a note to clients, despite beating forecasts "on most operating metrics".
Full-year pretax profit and earnings per share were ahead of expectations, prompting Richards to reiterate his 'overweight' rating and 3,200 pence price target.
The company's relative performance gave a more positive steer to future growth, with 74 percent of its funds outperforming on a three-year basis, an important track record for many of the advisors who pick funds in which to allocate money.
Schroders said it had got off to a good start this year, so far.
"The year has started well, but we are mindful of industry headwinds and that market returns remain difficult to predict. This is likely to weigh on client demand, particularly within the intermediary sales channel," Schroders said.
"Conversely, amongst institutional clients, we see a pipeline of business which is focused on long-term asset allocation."
The group said full-year pretax profit for 2016 rose 5 percent to 618.1 million pounds and beat a consensus estimate of 611.7 million, Reuters data showed.
That helped underpin a final dividend of 64 pence per share, to take the total dividend for the year to 93 pence, Schroders said in a statement.
Net inflows over the year were 1.1 billion pounds, as demand from institutional clients offset outflows from retail clients and wealth management. Acquisitions added a further 6.7 billion pounds.
Demand for Schroders' funds was led by institutions, particularly its multi-asset and fixed income products, and by clients in North America and Britain.
However, an uncertain market outlook spurred redemptions from retail investors, mostly from equities.
The group's net operating revenue margin, excluding performance fees, fell to 46 basis points from 49, partly as a result of fee pressure from investors against a backdrop of weak average industry returns. ($1 = 0.8152 pounds) (Reporting by Simon Jessop; editing by Andrew MacAskill and Susan Fenton)