Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Greater Europe. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

BlackRock Greater Europe (BRGE) aims to generate capital growth from large, mid and small-cap companies listed in Europe. The managers have flexibility to invest all over the continent (ex UK) – including up to 25% in countries listed in developing Europe. This flexibility clearly differentiates it from its peers.

Despite having been managed by the same team since 2008, responsibility for BRGE was handed to Stefan Gries in June 2017, which has seen a marked change in the way portfolio is assembled. Stefan now clearly defines the investment philosophy, has a higher conviction portfolio, and lastly tries to deliver the best ideas of the European team more effectively, having changed the way that ideas get into the portfolio. Stefan has also committed to use gearing more fully in the future, when his optimism warrants it.

The portfolio of stocks has been reduced to 42 holdings, and the changes have resulted in strong relative performance - although not yet a meaningful narrowing of the discount. Stefan’s philosophy is clearly rooted in a desire to be an “investor” rather than a “trader”, and aims to own a company for a minimum of three to five years. He aims to find “giants in their niches”, have a good proportion of recurring business, high cash-flow conversion and have good growth optionality.

Compared to other funds and trusts, BRGE has a relatively high exposure to Morningstar’s “growth style”, and definite bias to mid and small-cap stocks. Stefan tries to balance risks by holding a proportion of the portfolio in more defensive stocks. Exposure to emerging Europe is decided purely on a bottom-up basis, and currently constitutes around 7% of the portfolio.

Since Stefan was given responsibility for the trust in June 2017, the trust has outperformed the benchmark and investment trust peer group by over 6%. Despite having a more concentrated portfolio than average, over the past three years BRGE has achieved its strong returns with amongst the lowest volatility compared to peers (source: Morningstar). Over the longer term, BRGE has outperformed the index in seven out of the ten full calendar years since the team took over management of the trust.

Gearing is used tactically by the managers up to a maximum of 15% of NAV. Stefan sees gearing as a natural extension of the number of opportunities that he is finding, and whilst gearing was approaching 10% during early summer Iast year, as valuations started to feel fuller, he started to bring gearing down again. This proved prescient, given the sharp falls stock markets experienced in Q4 2018. Currently, BRGE has negligible gearing employed.

The board has been successful at managing the trust’s discount volatility, and the shares have traded within a relatively narrow band. While it didn't choose to enact the May 2019 tender offer, it has been buying shares back in the market, most recently at a discount (we estimate) of around 4.3%. As such, BRGE currently stands on a discount of 3.8% - narrower than the peer group average

Kepler View

We believe the appointment of Stefan Gries has been a shot in the arm for BRGE. The effect of his changes has been felt in the strong performance since then, and over time this (as well as a more clearly articulated investment philosophy) should improve the market’s understanding of the trust. As has been seen with Jupiter European Opportunities, sustained premiums to NAV are not out of the question in this sector.

With a focus on “high quality” names, Stefan looks for companies that have “strong” management, good free cashflow and decent options to reinvest this cash for growth. The prospects for companies that Stefan owns – “giants in their own niches” – should mean they are insulated from any EU-induced political travails. Indeed, any sentiment induced weakness in share prices could be seen as an opportunity to buy a concentrated portfolio of high-quality growth companies such as BRGE.

With the board’s discount control having proved effective to date, it seems unlikely that there will be opportunities to buy at a significant discount in the future. Continued outperformance, if sustained, could well see the trust move to a premium rating.

Bull
Bear
New, enthused manager who is clearly having a positive impact
Growth focus could mean underperformance if “value” style starts to come back into favour
Clear philosophy, and concentrated portfolio should enable manager to deliver alpha
Discount to NAV is narrow relative to peers
Amongst highest concentration portfolio, but amongst the lowest volatility – pointing to diversification benefits of investing across many different end markets as well as developing Europe

Continue to Portfolio

Fund History

05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
29 Dec 2021 Fund Analysis
BRGE continues to rank as the best performing European trust, with the team remaining unphased by near-term market risks…
10 Nov 2021 Results analysis: BlackRock Greater Europe
BRGE continues to rank as the best performing European equity trust, thanks to its high-conviction approach to growth investing…
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
10 Jun 2021 Fund Analysis
BRGE offers investors an unconstrained approach to European equities and has generated sector-leading performance…
26 May 2021 Stand and deliver
Is a high OCF daylight robbery or should investors keep calm and carry on? Our analysts debate the perennial question…
28 Apr 2021 The next value opportunity?
Two of our analysts debate whether Europe's improving vaccination programme will be the next opportunity for investors in their pursuit of returns...
21 Apr 2021 The importance of investment fundamentals in a crisis
2020 was a treacherous time for companies, but it showed the importance of capable management teams, a strong market position and resilient growth, says Stefan Gries, Co-Manager of the BlackRock Greater Europe Investment Trust plc.
04 Feb 2021 Eurovision 2021
Eight charts to guide investors through Europe...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
23 Dec 2020 Fund Analysis
BRGE offers a bottom-up European equity portfolio and a strong track record…
28 Oct 2020 Results analysis: BlackRock Greater Europe
Reporting results for the full year ending August 2020, BRGE has continued to perform strongly in the face of uncertain conditions…
07 Oct 2020 Europe: the road to recovery
In Europe, the pandemic has paved the way for a brave new era of co-operation, says Stefan Gries, Co-Manager of the BlackRock Greater Europe Investment Trust plc...
23 Jul 2020 Fund Analysis
The strongest-performing trust in the sector over the past five years, BRGE offers a portfolio of high-growth European opportunities…
18 Dec 2019 Fund Analysis
BRGE offers a concentrated portfolio of high-quality companies located across Europe…
24 Apr 2019 Nothing compares to EU
Currently one of the financial world's most unloved regions, we look at the sectors that are unique to Europe and how the persistent pessimism has presented attractive opportunities…
23 Apr 2019 Fund Analysis
Under a new management structure, BRGE aims to generate capital growth from all-cap companies listed in Europe...
30 May 2018 Forza Italia!
Recent weeks have seen Italy's rocky relationship with the EU thrust into the spotlight once again, but we think volatility for European equities may be a buying opportunity...
24 Jan 2018 Fund Analysis
The only European investment trust which invests in both Developed and Developing Europe, with a new lead manager from a team which has generated excellent alpha...
24 Jan 2018 Signs of continental shift
BlackRock Greater Europe portfolio co-manager Stefan Gries explains what’s driving investment opportunities in Greater Europe...
06 Dec 2017 Fund Analysis
A top-performing emerging European trust that has delivered significant alpha generation...
29 Nov 2017 Fund Analysis
A portfolio of UK equities with a focus on companies that can generate attractive income and capital growth.
25 Oct 2017 Fund Analysis
A UK small-cap trust that can profit in both rising and falling markets...
21 Mar 2017 Continental shift
While Europe remains out of favour with investors, shares from the region can offer value, says portfolio co-manager Vincent Devlin...
13 Dec 2016 Fund Analysis
13 Dec 2016 Small is beautiful
We identify the UK's most efficient trusts, all of which have operational costs below 0.1%...
View all

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