* BlackRock to manage money in index strategies
* Companies to discuss deeper partnership
* Follows decision to terminate deal with previous manager (Adds Lloyds CEO quote, background, SLA comment, shares)
By Simon Jessop, Emma Rumney and Lawrence White
LONDON, Oct 12 (Reuters) - Lloyds Banking Group has awarded BlackRock a 30 billion pound ($40 billion) slice of one of Europe's biggest investment contracts to be invested using the U.S. company's various index strategies.
The award to the world's biggest asset manager follows a high-profile bidding competition kick-started early this year after Lloyds said it was yanking 109 billion pounds in assets from current manager Standard Life Aberdeen.
That surprise move followed the 11 billion pound merger of original manager Aberdeen Asset Management and insurer Standard Life, which Lloyds said made the combined company a material competitor - a charge SLA is currently fighting.
Lloyds on Friday said that it would also look to agree a strategic partnership with BlackRock to collaborate in alternative asset classes, risk management and investment technology.
“BlackRock has been selected following a competitive tender process in which it clearly demonstrated its global market-leading capabilities and deep expertise in the UK market," Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance & wealth, said in a statement.
Lloyds-owned Scottish Widows and Lloyds' wealth management division contributed assets to the 109 billion pound mandate with SLA.
"The partnership will ensure that Scottish Widows and the group can deliver good investment outcomes for its customers over the coming years," Lorenzo added.
Lloyds said the BlackRock deal would begin after an arbitration process over the SLA contract termination concludes or when the existing contract expires, adding that it is confident in its right to end the SLA deal.
SLA, which is seeking 250 million pounds in compensation, declined to comment.
Lloyds said that, after a review by Scottish Widows and Lloyds' wealth unit of their asset management arrangements, it is also near to announcing plans for the remaining 80 billion pounds in assets and would update the market in due course.
Lloyds has been using the mandate transfer to leverage partnerships with asset managers towards the aim of growing its presence in the insurance and wealth sector - an ambition that formed a key pillar of its most recent three-year strategy, laid out in February.
Already holding a top share of its core banking markets, a push into other sectors offers Lloyds an opportunity for growth it has exhausted in products such as mortgages.
On Monday it confirmed it was in talks with Schroders , one of Britain's biggest listed asset managers, over a potential deal that would could be one of the biggest in wealth management tie-ups in recent years. ($1 = 0.7548 pounds) (Reporting by Simon Jessop Editing by Mark Potter and David Goodman)