Dec 18 (Reuters) - Australia's Insignia Financial ( IOOFF )

has rejected Bain Capital's A$2.67 billion ($1.69

billion) takeover bid, saying the offer does not provide fair

value to its shareholders, creating a barrier for the buyout

giant's Asia expansion plans.

Bain had earlier in the month offered A$4 apiece for the

178-year-old money manager, reigniting a strong sense of

investor appetite for Australia-listed wealth managers that have

recently seen their asset bases grow strongly.

However, Insignia turned down the Boston-based

investment firm's offer on Wednesday, saying it "does not

adequately represent fair value for IFL shareholders."

After the offer was tabled, brokerage Sandstone Insights

said a A$4.50-A$5 per share bid would generate "more serious

attention from the board."

Bain Capital has also been active in Japan, making

improved offers for Fuji Soft amid a bidding war with

rival KKR.

Bain completed the final close of its fifth pan-Asian

private equity fund at $7.1 billion in November last year. It

also struck a deal to acquire Australian aged care operator

Estia Health for A$838 million in August.

KKR's A$2.2 billion deal with Australia's Perpetual

also hangs in the balance after a tax bill blowout.

The Australian wealth management sector has recently seen

some mergers and acquisition activity. Hedge fund Regal Partners

had made an offer for Platinum Asset Management in

September, but the buyout talks did not bear fruit.

Insignia rejected Bain Capital's bid as it moves ahead

with a strategy to restore confidence among shareholders, having

already faced resistance from activist investor Tanarra Capital.

Bain Capital did not immediately respond to Reuters'

request for comment.

($1 = 1.5785 Australian dollars)