* Sale agreement expected in next few weeks
* Insight 3rd party business to fetch up to 250 million pounds
By Victoria Howley and Joel Dimmock
LONDON, Aug 3 (Reuters) - Bank of New York Mellon and Northern Trust are late-stage rivals to buy the bulk of Insight, one of Lloyds Banking Group's asset management businesses, people familiar with the matter said on Monday.
Both have entered binding bids for the third-party asset management business of Insight. It is expected to sell in the next couple of weeks for between 230 million and 250 million pounds ($385 million to $419 million), the people said.
It was not clear if another potential buyer, private equity firm Hellman & Friedman, remained in the auction. H&F, which owns fund manager Gartmore, had offered less than 200 million pounds, another person said.
Two other potential buyers, Affiliated Managers Group and British fund manager Schroders, were earlier looking at the business but decided against continuing with their bids, two of the people said.
The process is being driven by Insight Chief Executive Abdallah Nauphal, who does not want the business to be absorbed into a larger fund management group, sources have said.
Insight is valued for its liability driven investment (LDI) business, designed to align investment strategy with future pension liabilities -- a potential growth area but one with relatively low margins.
As at March 31, Insight had total assets under management of 116.6 billion pounds, including 70 billion pounds managed on behalf of third parties. The sale of the unit is sensitive, as state-backed Lloyds could face criticism over any deal that involves job losses or is seen to enrich executives.
Nauphal joined Insight as head of fixed income after the firm bought Rothschild Asset Management in April 2003. He became chief executive in 2007.
Insight became part of Lloyds after the bank acquired troubled mortgage lender HBOS last year. The group, which reports half-year results on Wednesday, also owns Scottish Widows Investment Partnership and decided earlier this year to keep the units separate in anticipation of a possible sale.
Lloyds declined to comment. Insight, Nauphal and the other companies involved declined to comment. (Additional reporting by Myles Neligan and Simon Meads in London and Paritosh Bansal in New York; Editing by Rupert Winchester)