Britain's Lloyds said on Wednesday it would sell the bulk of its Insight Investment unit to Bank of New York Mellon for 235 million pounds ($386 million) as part of a shake-up of its asset management units.

Lloyds, 43 percent owned by the state, has for months been expected to sell the third-party fund management business of Insight, which manages assets of approximately 80 billion pounds for pension schemes, intermediaries and other businesses.

Bank of New York Mellon, which lost out to rival BlackRock in the bidding for rival Barclays' BGI unit, has long been a front-runner.

Under the deal, expected to complete in the final quarter of the year, Bank of New York Mellon will pay 200 million pounds in cash and 35 million in equity.

Lloyds Banking Group said there could be some role reductions but gave no details on the precise number of potential job losses.

Under the reviewed structure for its fund management units after the shake-up, Lloyds said it would bring together its asset management business under its Scottish Widows Investment Partnership (SWIP).

SWIP will have 125 billion pounds of assets under management after the shake-up, including funds sourced from its bancassurance businesses, wealth management and its Clerical Medical intermediary franchise that had been managed by Insight.

Both SWIP and Insight are strong and well established asset managers but we believe Insight is better able to focus on developing its specialist external franchise outside the Group, Jo Dawson, Lloyds' Wealth and International Director, said.

Insight is valued for its liability driven investment business, designed to align investment strategy with future pension liabilities -- a potential growth area, but one with relatively low margins.

Sources familiar with the matter had told Reuters that the sale process was driven by Insight Chief Executive Abdallah Nauphal, who does not want the business to be absorbed into a larger fund management group.

Insight became part of Lloyds after the bank acquired troubled mortgage lender HBOS last year.

Shares in Lloyds were down 1.5 percent at 3:58 a.m. EDT at 89.6p. (Reporting by Clara Ferreira-Marques; Editing by Hans Peters)