* Asset management to boost group profit by 150 mln by 2020
* To spend up to 35 mln euros to attract portfolio teams
* Q1 net profit falls 9 pct, EBIT up 4.2 pct (Adds manager comments, shares, detail)
By Stephen Jewkes and Gianluca Semeraro
MILAN, May 11 (Reuters) - Generali is looking to buy portfolio management teams to expand its asset management operations and beef up its fee-based business, the Italian group said after reporting a 9 percent fall in first-quarter profits on Thursday.
Italy's biggest insurer said it aimed to boost group net profit by 150 million euros ($163 million) by the end of 2020 and expand assets under management to 500 billion euros.
The plans involve investing in its own business, which currently manages 450 billion euros of assets, and spending up to 35 million euros on acquiring other asset managers.
"We're waking up a sleeping giant," Chief Investment Officer Tim Ryan said in a conference call, adding that 86 percent of the group's 78 billion euro unit-linked asset business was outsourced.
Generali, controlled by Italian investment bank Mediobanca , owns 51 percent of listed private banking and wealth management firm Banca Generali but does not intend to include it in its asset management plans.
"Banca Generali will benefit but it's out of the scope of this strategy," Ryan said.
Struggling with costly regulatory changes and low interest rates, many European insurers are expanding their asset management operations to generate high fees with minimal capital.
"Generali's new asset management strategy... sets ambitious targets in terms of growth and profitability," Italian broker Banca IMI said.
Earlier this year Generali was the target of a tie-up plan by Italy's biggest retail bank, Intesa Sanpaolo.
The plan was later scrapped but it raised the pressure on Chief Executive Philippe Donnet to boost shareholder value.
Shares in Generali have outperformed this year following the Intesa Sanpaolo move but over a longer time-frame have lagged peers due to investor concerns over profitability.
Earlier on Thursday Europe's third-biggest insurer reported a 9 percent fall in first-quarter net profits to 535 million euros, due to lower capital gains and higher taxes and impairments, including a 42 million euro writedown on its investment in ailing national airline Alitalia.
Analysts on average had been expecting a net profit of 598 million euros, according to Thomson Reuters data.
"Generali's net income ... (was) well below expectations," RBC Capital Markets said.
At 1216 GMT Generali's shares were down 2.8 percent at 14.87 euros, while the Stoxx Europe 600 insurance sector index was down 1 percent. ($1 = 0.9223 euros) (Additional reporting by Danilo Masoni; Editing by Greg Mahlich)