Figures from the 2012 annual report on Nationally Recognised Statistical Rating Organisations (NRSROs) from the US Securities and Exchange Commission (SEC) shows that for the year ending December 31 2010 the big three accounted for roughly 97 per cent of all NRSRO issued credit ratings.

While there were, at the time, 10 NRSROs in terms of ratings for government, municipal and sovereign securities the share of the big three increased to 99 per cent.

It is therefore little wonder that when these three institutions make a move, investors take more notice than if say DBRS or Egan Jones Ratings downgrades a country.

Within the big three Fitch is by far the smaller player, particularly on sovereign terms, with approximately a 16.65 per cent share of ratings of issuers of government securities compared with 38.49 per cent from Moody’s and 44.19 per cent from S&P. But while these agencies clearly have more influence, do their decisions actually have an effect on investor sentiment? The governments of France, the US and the UK, and other countries downgraded from AAA by one or more agencies, would suggest not.

Following the UK’s downgrade by Moody’s in February 2013 George Osborne, chancellor of the exchequer, pointed out in a statement that the agency notes the UK’s creditworthiness remains high and warned the downgrade would not steer him from the current economic recovery plan to cut the UK’s deficit. But with Fitch expected to issue a downgrade shortly, losing a rating from two of the three could be a problem.

Emma du Haney, fixed income product specialist at Insight Investment, says: “Clearly if all agencies are onside and do the downgrade that is more damning than just one of them. In terms of benchmark it depends how the indices are structured, because to be in an index some rating providers will take the average of the three credit ratings, so if two have downgraded a country that could have an impact on it being in the index.”

Frances Hudson, investment director, global thematic strategist for multi-asset investing at Standard Life Investments, says that most would look to use a blend of the three agencies to get an indication or look at their historic strengths.

She adds: “They have their own models and different timetables for major reviews of specific sectors, which may be relevant. In terms of bias Fitch is traditionally strong on the financial sector but would be an unlikely first (negative) mover on, say, French sovereign credit.

“S&P seems more willing to take on the authorities – it was the first of the big three to downgrade the US and the first to be sued by the US Department of Justice.”

While the US and Europe are trying to reduce the reliance on credit rating agencies, ratings still have an effect because of their tie-up with the benchmarks.

Ms Hudson explains: “For example, ratings-based benchmarks define the universe if you are running a fund with a specific mandate – AAA, investment grade or high-yield – which affects managers of money market funds or corporate bond funds. However, on a fundamental basis, asset management companies tend to carry out their own credit analyses.”

Ms du Haney agrees that most firms do their own work and the ratings of external agencies are used only as a reference. “We would never invest just on the back of a credit rating. We do our own research here at country level and on corporates as well.”

Shelley Moledina, head of fixed income product specialists at Legal & General Investment Management, adds that while the big three all have slightly different focuses and methodology, they all use similar notation for credit quality so ratings can be broadly comparable.

“In the long term, ratings agencies have been pretty accurate with their assessments.” But she adds: “In the short term, they are usually behind the market.

“A good example of this was the BP Macondo oil spill in 2010 where BP was downgraded from strong AA to mid A in the six month period by Moody’s and S&P but where Fitch ‘overshot’ the rating by giving it a BBB rating.

“Here the difference in analysis was linked to the size of costs – to stop the leak, to clean up, legal and compensation costs – and the timing of these payments where Fitch thought these amounts would be bigger and timeframe shorter than the others.”

While regulators may be seeking to reduce reliance and increase competition in credit rating agencies, the big three have a firm foothold that has existed for more than a 100 years in some cases. So while investors may have a favourite, the best idea seems to be to take an average of the big three’s ratings, but to bear in mind they can be behind the curve.

Nyree Stewart is deputy features editor at Investment Adviser