The figures illustrate the vulnerability of emerging market-focused asset managers such as Ashmore to the prospect of interest rate hikes in the U.S. which make investors more likely to sell riskier assets bought in search of higher yields.

Money managed by Ashmore declined by $3.7 billion (2.31 billion pounds) during the quarter to $71.3 billion. While negative investment performance accounted for $3.4 billion of the fall, about $300 million also flowed out of funds.

The assets under management came below the bottom range of the consensus of $72-76 billion, said David McCann, an analyst at Numis Securities, adding that the market was more disappointed by the net flows figure. "Most people were looking for a small positive net flows and certainly that was the kind of guidance or message we got when we had the results in early September," he said.

At 1010 GMT (11.10 a.m. BST) shares in Ashmore were down 2.5 percent at 293.9 pence, their lowest since August 2010. By comparison, the FTSE Mid-250 index <.FTMC> was down 0.2 percent on Tuesday. Ashmore share have lost more than a quarter of their value this year.

An appreciation in the dollar hit the performance of its local currency and blended debt holdings. The money manager said clients pulled out money towards the end of the quarter mainly from equities and Japanese multi-strategy funds.

Its local currency, blended debt and corporate debt funds saw net inflows in three months to September.

Ashmore Chief Executive Mark Coombs struck a positive tone on the prospects for emerging markets despite signs of an economic slowdown.

"The fundamentals in emerging markets continue to be supportive and many of the market uncertainties of the past year are being resolved," he said.

He said political changes in a number of emerging market countries had resulted in favourable reformist agendas and geopolitical risk was limited, while the U.S. Treasury market has also reacted in a measured way to the increasing prospect of higher short-term interest rates.

"This provides a firm footing for Ashmore's investment processes to take on risk and to deliver long-term investment performance for clients," he added.

(Reporting by Nishant Kumar; editing by Simon Jessop/Keith Weir)

By Nishant Kumar