BlackRock Greater Europe 25 September 2024

BlackRock Greater Europe (BRGE) targets capital growth through investing in European companies. The trust is run with a fairly concentrated portfolio, with the top ten making over 50% of the portfolio of 30–40 stocks. Broadly speaking the team favour 'quality growth companies' and have long-standing holdings in key European sectors such as healthcare, semiconductors, and luxury goods. BRGE has a mandate to invest across the market-cap spectrum but predominantly invests in large-caps.

Stefan Gries has managed BRGE since June 2017, having been with BlackRock since 2008. Alexandra Dangoor joined Stefan as co-manager in 2023, having worked in the European equity team since 2019. BRGE has performed strongly over the last five years, with an NAV total return of c. 71%, ahead of its benchmark's c.47% and the peer group's c.50%. Since Stefan first took on his management role, the trust's NAV total return is c. 115% compared to the benchmark's c. 67% .

BRGE is currently geared c. 7%, which after a period of lower gearing due to volatile markets, marks a return to a longer-term average and is a sign of the team's confidence in the prospects for the portfolio over the coming year or two.

BRGE typically trades at one of the narrowest discounts in the peer group, currently c. 6% against a peer group average of c. 8%. The narrow discount is likely a consequence of BRGE's good long-term performance, but in addition, BRGE’s board has made active use of share buybacks this year with the objective of limiting the discount, which we chart in the Discount section.

With a yield of c. 1.1%, BRGE is principally a vehicle for capital growth, but the board has progressively increased the dividend since BRGE’s inception at an annualised rate of over 7% and the trust is part of the AIC's next generation of dividend heroes.

BRGE has a 'Growth' rating under Kepler's rating system.

In the Portfolio section, we look at global flows in and out of European equity funds, a key barometer of investor sentiment, and see that the rate of outflow has abated significantly since 2022 and is on the cusp of turning positive. The BRGE team report already seeing some positive inflows into their own funds as investors start to reassess European equities after a period when many have been underweight even as they have watched some of the key constituents of the market, and BRGE's portfolio, continue to report good results. From a political point of view, Europe has been a difficult place for investors to fall back in love with, but so many of BRGE's companies are not solely domestic plays on Europe, and in many cases, such as BRGE's semiconductor companies or its luxury brands, they are global leaders in their niches, and not just lower-valued alternatives to stocks elsewhere.

All of this might imply that European equities haven’t moved higher over the last year, but in fact, they have, even as investors have shown limited interest. So, if BRGE and its companies can perform well when many investors are ignoring Europe, then we think there's plenty to go for when sentiment becomes more positive. BRGE's return to modest gearing signals the team's belief that the good progress of their portfolio will continue and BRGE plays into key growth trends that, in our view, any investor should consider as a central part of their growth portfolio.