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By Dasha Afanasieva and Kit Rees
LONDON, Nov 10 (Reuters) - 3i Group said on Thursdayits private equity business made returns of almost 1 billionpounds ($1.2 billion) in the six months to Sept. 30 afterbenefiting from the fall in sterling.
Helped by the performance of the private equity arm, thegroup, which invests in northern Europe and North America andalso has infrastructure and debt management divisions, producedan investment return of 1 billion pounds or 23 percent ofopening shareholders' funds compared with 168 million in thesame period in 2015.
Equity analysts said the rise in the group's net asset valueper share to 551 pence from 463 pence on March 31, 2016, was inline with expectations.
But 3i shares closed down 7.78 percent. A trader cited abroader sell off in European equities and some profit taking ina stock which had rallied more than 25 percent this year.
Chief Executive Simon Borrows said the London-listed groupwould continue to be active in both deploying capital andrealising its investments for the remainder of the financialyear, which ends in March 2017.
He said there had been limited impact from Britain's vote toleave the European Union on the group but the steep fall insterling benefited the investment portfolio's performance as itis reported in pounds. The group recorded a total net foreignexchange gain of 283 million pounds.
3i said lingerie retailer Agent Provocateur continued to beimpacted by falling luxury spending and had also suffered fromthe inconsistent execution of its recent store expansionprogramme and the discovery of accounting problems.
"Reflecting these challenges, we reduced the value of ourinvestment by 39 million pounds in the period," 3i said.
With very low interest rates globally, alternativeinvestment funds are benefiting from a flood of capital lookingfor yield. But this has resulted in more private equity moneychasing deals and pushing up valuations.
"I believe we are going to be locked into a low interestrate environment in Europe, where most of our investments are,for some time to come," Borrows said on a call with reporters.
3i declared an interim dividend of 8.0 pence, half of itsbase dividend and said the board expected to recommend a totaldividend for the year of no less than the 22 pence, paid in theyear to March 31, 2016.
It made 654 million pounds after selling assets such asowner of baby brands Mayborn and more recent investments such asGeka which makes cosmetic brushes and Basic-Fit, a discount gymoperator.
($1 = 0.8037 pounds) (Editing by Jane Merriman and Mark Potter)
