The new subsidiary, Standard Life Investments, will compete with managers such as Mercury Asset Management and Morgan Grenfell, and is aiming to manage pounds 100bn within five years.
The group will begin by managing Standard Life's existing funds, which hold shares amounting to 2 per cent of the UK equity market. It will also aim at a 5 per cent share of the retail investment market, managing money for private investors.
Standard Life said it had "aggressive plans" to challenge established fund managers, such as bidding for contracts to run hundreds of millions of pounds at a time for big pension funds.
Sandy Crombie, the chief executive of the new company, claimed the insurer had already outperformed established fund managers in the market to run pooled pension funds on behalf of small and medium-sized companies.
The company, which has taken four years to organise,will have a staff of 500, most based in Edinburgh with 30 in Montreal, Canada.