By Jessica Toonkel and Mike Stone

(Reuters) - Towers Watson & Co (>> Towers Watson & Co) and China's Shanda Group and CITIC Group Corp are the remaining parties bidding for Russell Investments, in what is expected to be a roughly $1.5 billion deal (1 billion pound), people familiar with the matter said on Wednesday.

Towers Watson, known primarily for its risk management and human resource consulting services, is looking to expand in asset management with the acquisition of Russell, the people said.

Shanda Group, an investment holding group that started out as an online game company, is now interested in getting into the U.S. financial services business, according to three of the sources. CITIC, a Beijing-based conglomerate, has a financial services arm and also owns CITIC Asset Management Corporation Ltd.

London Stock Exchange Group Plc (>> London Stock Exchange Group Plc), which owns Russell, may view Towers Watson as a more reliable buyer than the Chinese companies, one of the people added, although no agreement for the sale of the business has yet been reached.

The sources asked not to be identified because details of the sale process are confidential. LSE and Towers Watson declined to comment. Representatives for CITIC and Shanda did not respond to requests for comment.

LSE bought Russell from insurer Northwestern Mutual last year for $2.7 billion, primarily for its large index business. The exchange operator prevailed over a number of interested buyers, including CIBC and a handful of private equity firms, sources said at the time.

Based in Arlington, Virginia, Towers Watson is a global professional services company which offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management.

Beijing-headquartered CITIC Group is a state-owned investment company of the People's Republic of China with holdings in finance, mining and infrastructure, among other sectors.

LSE tapped JPMorgan Chase (>> JPMorgan Chase & Co.) to sell Russell Investments earlier this year after having informal conversations with at least three interested buyers, including Canadian Imperial Bank of Commerce (>> Canadian Imperial Bank of Commerce).

Headquartered in Seattle, Russell had $272 billion in assets under management at year-end, according to its website.

(Reporting by Jessica Toonkel and Mike Stone in New York; Editing by Leslie Adler)