UPDATE 1-Russia's VTB may become sovereign wealth manager

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MOSCOW, March 26 (Reuters) - Russia's second-largest bank, state-controlled VTB (VTBR.MM: Quote, Profile, Research, Stock Buzz), may become an asset manager for Russia's $32 billion National Wealth Fund (NWF), Finance Minister Alexei Kudrin was quoted as saying on Wednesday.

Russia has split its $157 billion oil stabilisation fund into a Reserve Fund, which will cushion the budget from a fall in international oil prices, and a growth-oriented National Wealth Fund.

The central bank will continue to manage the Reserve Fund while the government plans to create a separate agency, which will hire external managers for the NWF's assets when investment rules for the fund are drawn up by October 2008.

"Both Russian and foreign companies may become asset managers for the fund. Possibly it will be the Development Bank and VTB," Russian agencies quoted Kudrin as saying, also referring to a development lender created last year.

Kudrin said investment in equities was not on the agenda as long as the financial turmoil continued to eat into global stock prices. He also said the NWF will have several external managers.

VTB said this week it will invest $500 million and hire 400 people in the next two years to expand its investment banking business, targeting up to $40 billion worth of investment banking deals, including public offerings and bond issues.

VTB's biggest international investment deal to date was the acquisition of a 5 percent stake in space and aviation firm EADS (EAD.PA: Quote, Profile, Research, Stock Buzz) in 2006, which caused shivers among European politicians and later drew fire from VTB's shareholders.

Kudrin wanted the NWF to invest strictly abroad, but banking and industrial lobbies, who want the fund to invest at home as well, appear to be winning the upper hand in the debate and have outgoing President Vladimir Putin on their side. (Reporting by Gleb Bryanski; Editing by Sue Thomas and Quentin Bryar)