By Jessica Toonkel and David Gaffen

NEW YORK (Reuters) - Goldman Sachs Asset Management, the asset management arm of Goldman Sachs is buying $42 billion Dwight Asset Management Company LLC from Old Mutual Asset Management, the company confirmed after Reuters reported the deal.

Terms of the deal, which is expected to close in the second quarter of 2012, were not disclosed.

Dwight, which had $42 billion in assets as of December 31, is an institutional fixed income asset manager that specializes in stable-value funds for retirement plans.

For Goldman Sachs, the acquisition represents an attempt to become a bigger player in the defined contribution space, according to a release issued by the firm.

"Many of our clients are focused on stable value as an important asset class for DC plans and Dwight has been an innovator in this space," Eric S. Lane and Timothy J. O'Neill, co-heads of the investment management division at Goldman Sachs, said in a statement.

Reuters first reported in August that Old Mutual Asset Management, a subsidiary of London-based investment company Old Mutual PLC, was looking to sell Dwight Asset Management Company LLC as part of its ongoing effort to free up capital in preparation for a partial IPO of its asset management unit [ID:nS1E78T1S2].

In August, Old Mutual sold its $2.3 billion U.S. mutual fund business to Touchstone Investments [ID:nN1E7860RG]. Old Mutual Asset Management's 17 affiliated asset managers had $224 billion as of September 30.

(Reporting By Jessica Toonkel. Editing by Gunna Dickson)