BlackRock Greater Europe

BRGE offers a bottom-up European equity portfolio and a strong track record…

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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.

BlackRock Greater Europe
2021 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler for growth... Find out more

BlackRock Greater Europe Investment Trust offers investors a bottom-up portfolio of European equities, selected from the entire region. The managers, Stefan Gries and Sam Vecht, select what they view as the best companies within continental Europe, paying little heed to top-down allocation through regional or macro trends within the continent.

As we describe in the Portfolio section, stock selection is driven by a company’s unique characteristics, such as strong ROE, constant innovation and investment, and strong and consistent management. The managers are supported by BlackRock’s substantial team of European equity analysts, who aid in the identification and valuation of potential investments.

Despite the relatively recent tenure of Stefan Gries, who was appointed co-manager in June 2017, BRGE has enhanced its exceptional performance record and is now the best-performing fund over the last three and five years. Since the start of Stefan’s tenure the trust has generated an NAV return of 60.5%, well ahead of the 17.1% of BRGE’s peers and also ahead of the 25% return of the trust’s benchmark, the FTSE World Europe ex UK Index. Recent performance has been driven in large part by the resilience of BRGE’s underlying companies during COVID-19, a key factor in the managers’ investment process which is outlined further in the Performance section.

Despite the clear outperformance, BRGE currently continues to trade at a discount of 2.7%, having been caught up in the broader aversion investors have had towards European equities recently. While the strategy’s focus is on capital growth, it has managed to sustain a progressive dividend policy, with a current dividend yield of 1.22%.

Kepler View

BRGE is an excellent example of a quintessential stock-picker strategy, given its clear bottom-up nature, which is agnostic to most non-corporate factors. BRGE is also one of the few Europe trusts within its AIC sector which also invests in emerging Europe, giving investors access to every region within Europe.

Though the managers pay little attention to the sectoral exposure, their current overweight to economically sensitive sectors means they are well positioned for a post-COVID-19 recovery: once global demand picks up, so should demand for these sectors’ products. BRGE can be seen as a solution for investors wanting a broad Europe ex UK exposure, or for those looking to add alpha to an existing Europe allocation.

We have confidence in manager Stefan Gries, as he continues to stamp his authority on the portfolio and the peer group. While past performance doesn’t depict future results, we have confidence in the positioning of his current portfolio due to both the resilience of the underlying companies during COVID-19 and their post-pandemic upside potential.

Like many of its European peers, BRGE currently trades at a discount. While it has one of the lowest discounts of the peer group, we see potential catalysts for future narrowing of the discount. If the economic outlook for Europe continues to improve – something the managers are increasingly confident about – broader demand for European strategies should increase. This should resolve the major hindrance for BRGE’s share demand, which is a general disdain for the European sector, regardless of individual trusts’ performance.

BULL BEAR
Offers an allocation to both developed and emerging Europe
Risk of underperforming during deep value rallies
Very strong track record of outperformance, which has been maintained during pandemic
Trades at a premium to most of its peers
Large and well-resourced analyst team underpin disciplined stock selection
Use of gearing can amplify losses
David Johnson
David is an investment trust analyst and joined Kepler in September 2020. Prior to this he ran multi-asset model portfolios at a discretionary fund manager, and has worked in both asset management and investment banking during his career. He holds a Masters in Finance from the University of Warwick and is a CFA charterholder.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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