In the current competitive environment where fund flows are concentrated on few players having large well established funds is key, according to Fitch Ratings.

Of the 12,000 cross border funds, only 430 funds (i.e. 3.5 per cent) have more than EUR1bn of assets. UK and US players are far better positioned than those in mainland Europe in the EUR1bn+ funds segment.

Of the top 10 players with more than 25 cross border funds and highest proportion of flagships (more than EUR1bn of assets), all but one are UK or US based.

"These managers have benefited from their expertise in global products, emerging markets and fixed income, where flows have concentrated in the recent years, as well as their active cross border distribution strategy," says Aymeric Poizot (pictured), managing director in Fitch's fund and asset manager rating group.

By contrast, mainland European players offer fragmented fund ranges with few, if any, flagship funds. Of the 10 players with the largest ranges and smallest proportion of flagships, all but one are based in mainland Europe. Moreover, managers that are part of large banking or insurance groups tend to exhibit more fragmented ranges. The main reasons for this are firstly that multiple captive distribution networks prevent the development of large funds, secondly that there is a focus on domestic assets where recent growth has been muted and thirdly that such managers may have weaker distribution strategies abroad. However, in the specialist segment, there are mainland European managers with flagships, such as Skagen of Norway, or Carmignac, DNCA, and Comgest of France.

Having fewer but larger funds allows more efficient administration, reporting, controls, and related support functions. Portfolio managers can also focus on fewer funds and spend less time on administrative and commercial tasks, allowing them to spend more time on portfolio management. Commercially, flagship funds are also more visible, can accommodate bigger investor tickets and serve more easily as benchmarks when fund managers promote their portfolio management.

Conversely, the presence of flagship funds increases a company's reliance on a one track record, management team or even star manager. Should the asset class or investment strategy fall out of favour or the lead manager leave, the company is exposed to greater business risk. Nevertheless, investors tend to view this reliance positive as in practice it involves a stronger commitment and increased attention from the management company.

Fitch gives value to the flagships in its asset managers and fund quality ratings. In Fitch's view, flagships add value to the business model, the efficiency of the platform, and the portfolio management focus. Nevertheless, Fitch also considers business risk, as mentioned above, and whether a fund's size may impede management flexibility or the liquidity of the fund.