The acquisition of Ignis by Standard Life would put a big question mark over the future of the company's operation in Glasgow, where around 230 people are employed.
The Edinburgh-based pensions giant announced it is in exclusive talks to buy Ignis from Phoenix Group in a potential £400m deal.
The Standard Life Investments fund management operation in Edinburgh dwarfs Ignis, and might be expected to absorb the work done by the company.
Ignis has around £67bn under management while Standard Life Investments looks after £184bn assets.
Many of the staff at Ignis are managing funds held to back closed life and pension funds previously run by the likes of Scottish Provident and Scottish Mutual.
News of the talks will be greeted with mixed feelings in Scotland.
Some may applaud such a statement of ambition on the part of Standard Life.
The prospect of cuts at Ignis, possibly involving the closure of the Glasgow operation, will cause deep unease in the city.
The city's fund management sector has been shrinking in recent decades amid rationalisation in the financial services industry.
Some big life and pensions firms that had significant investment operations in Glasgow, like Scottish Mutual, surrendered their independence. Scottish Mutual was closed to new business by the former Abbey National in 2003.
Ignis is the latest incarnation of a business that has operated under the control of the FS, Britannia, Britannic and Resolution life and pension businesses.
Phoenix acquired the business in 2008, through the takeoever of Resolution, which consolidated closed life funds.
The ranks of Glasgow's investment management businesses have been thinned by takeovers.
Aberdeen Asset Management swallowed up Murray Johnstone and Glasgow Investment Managers, in 2000 and 2007 respectively.
Led by Martin Gilbert, Aberdeen Asset Management is understood to have considered but rejected a plan to bid for Ignis in 2012. It is buying the Scottish Widows Investment Partnership business for up to around £650m.
Ignis has been refining its growth strategy while battling with challenging market conditions in recent years.
The group, which also employs around 150 in London, has steadily declining assets in Phoenix's closed funds, including Scottish Provident, Scottish Mutual and Alba Life, which are in run-off.
It has out-sourced lots of administration work to HSBC.
In August, chief executive Chris Samuel said Ignis had been making good progress in areas like fixed income and property.
He said then: "All of the areas that are growing most aggressively at the moment are Glasgow-based."
In a statement, Standard Life confirmed it is in exclusive and advanced discussions with Phoenix about buying Ignis adding: "Discussions are ongoing and there can be no certainty that any transaction will be agreed."
Phoenix issued a similar statement and said it will update the market at the time of its annual results on Wednesday.