Cerulli Associates, the research firm, that Europe asset managers have been too slow to rationalise funds through through closures of poor performers or mergers into stronger vehicles.

The February edition of the Cerulli Edge report said there are approximately 43,200 funds (ex-money market) registered for sale in Europe, with total assets of €15.1 trillion, a median assets under management of €350m.

However the report said that since the financial crisis the most successful funds in each sector have gathered nearly all the inflows – such as Standard Life’s Global Absolute Return Strategies in absolute return, Franklin Templeton in bonds, Carmignac in equities.

Cerulli said: “The billion euro-plus club sits at the top of the assets under management league, with a big gap between its elite membership and the rest of the pack. So the average size of the stragglers can be significantly smaller than that initial figure suggests.”

The researcher said that as profitability has fallen in Europe more groups will be forced to look at the viability of subscale funds. For example, In Europe total expense ratios for actively managed equity fund  has fallen from 102 basis points in 1998 to 92 points in 2012 and bond fund figures decreased from 80 to 65bps over the same period.

Cerulli analysed the number of days a fund manager outperformed or matched its benchmark over a time period and scored funds out of 100.

The report said: “Across Europe, we have identified 122 funds (excluding money market funds), controlling assets worth €42bn that have been consistently atrocious performers.”

Atrocious funds only outperformed or matched their benchmark once every four days over a 10-year period.

A further 1,440 funds with total assets under management of €24bn, are described as “undersized and unloved.” They were launched between three to five years ago but assets of less than €50 m.

Cerulli said that the most important factor in rationalisation is merger activity as acquirers merge overlapping products.

The report said: “Industry M&A is expected to accelerate over the coming years, giving us hope that consolidation rates will rise.”