* Q2 adjusted EPS C$0.20 vs EPS C$0.17 in Q1
* Below analysts' estimates for C$0.21 EPS
* Shares fall 2.8 pct; stock downgraded to neutral (Adds details, analyst's comment, share price)
By Andrea Hopkins
TORONTO, Aug 11 (Reuters) - CI Financial Corp (CIX.TO) said on Tuesday its profit edged higher in the second quarter before a one-time tax charge, but the independent fund manager missed expectations and its shares fell.
"CI, along with its peers, has enjoyed a strong run. However, near-term earnings prospects no longer support its valuation and we believe that its shares are likely to pause," Dundee Capital Markets analyst John Aiken wrote in a research report, downgrading the stock to a "neutral" rating from "buy".
Shares of CI fell 2.8 percent to C$20.32 in late afternoon Toronto trade, still nearly double their 52-week low of C$10.60, hit in February.
The Toronto-based fund manager continued to contain costs in the second quarter after sharp cuts in the first three months of the year, but Aiken said there is little room for more reductions at the already-efficient CI.
"Cost containment remained impressive but we did not anticipate the magnitude of the negative impact that changing product mix and the reduction in money market fees would have on marginal management fees," Aiken said.
CI said adjusted earnings were 20 Canadian cents a share in the second quarter ended June 30, up 18 percent from 17 Canadian cents a share in the first three months of 2009.
The results came in just below analysts' expectations for adjusted earnings of 21 Canadian cents a share.
This was the second quarter in which the fund manager reported as a corporation, after converting from an income trust on Jan. 1, so there are no comparable results for the second quarter of 2008.
The adjusted earnings did not include income tax expenses of C$24.8 million ($22.5 million), compared with C$16.3 million in the previous quarter, when a one-time C$8.0 million income tax recovery was recorded. When those items are included, CI had earnings per share of 17 Canadian cents, down from a comparable 20 Canadian cents in the first quarter.
CI said fee-earning assets rose 12 percent in the quarter to C$87.4 billion as markets improved and it notched positive net sales of funds.
Gross sales rose 9 percent to C$2.3 billion, while net sales were up 272 percent at C$663 million.
$1=$1.10 Canadian Reporting by Andrea Hopkins; Editing by Peter Galloway