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

seen their asset bases grow strongly.

Insignia's shares are currently trading 0.3% lower at

A$3.59, well below Bain's per share bid, after having slipped

2.8% during the session.

Insignia turned down the Boston-based investment firm's

offer on Wednesday, saying it "does not adequately represent

fair value for shareholders."

"The ball is now in Bain's court to either up the bid and

give a reason to say yes or they can walk away," said Henry

Jennings, senior market analyst at marcustoday newsletter.

"I would say that somewhere above A$4.20 per share would be

enough to get them talking."

Bain has also been active in Japan, making improved offers

for Fuji Soft amid a bidding war with 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 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. Regal Partners

had made an offer for Platinum Asset Management in September,

but the buyout talks failed.

Insignia rejected Bain's bid as it moves ahead with a

strategy to restore confidence among shareholders, having

already faced resistance from activist investor Tanarra Capital.

"We regard the Bain proposal as highly opportunistic. We

want the Insignia management team to remain focused on the

business improvement plan they are in the early stages of

delivering," Tanarra said on Tuesday.

($1 = 1.5785 Australian dollars)