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This is a non-independent marketing communication commissioned by BlackRock. 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.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Our three investment themes in European markets
We have three key areas represented in our European equities portfolio, where we find a range of long-term investment opportunities: semiconductors, luxury goods and healthcare. Each area has compelling growth characteristics that should allow companies exposed to those areas to grow over the long-term regardless of the strength or weakness of the region’s economies. At the same time, Europe can claim world-class companies in each area, with market-leading technology and innovation.
Semiconductors
In semiconductors, for example, Asia has dominated, but European companies are increasingly building a crucial role. The building block of all electronic products, semiconductors play a crucial role in the long-term growth of areas such as artificial intelligence, electric cars, plus defence, smart devices and gaming. As technology becomes more sophisticated, it requires smaller, faster and greener chips – and more of them.
Semiconductors have become a battleground between nations. Governments across the world are racing to secure chip dominance. In 2023, the EU passed the European Chips Act, designed to reinforce the region’s technological sovereignty and double its market share in semiconductors to 20%.2 It sought to build up the semiconductor ecosystem in the EU, and ensure the resilience of semiconductor supply chains. The Act allocated $47bn to support the sector’s growth3, which in turn supports investment in the semiconductor industry.
Luxury goods
Luxury goods are another important area of long-term growth in European equities. It is an area where Europe is dominant, accounting for around two-thirds of all sales of luxury products4. Many of the largest companies in Europe are now in the luxury sector, including LVMH, Ferrari and Hermes5 and in April 2023, LVMH became the first European company to surpass $500 billion in market value.6 These luxury behemoths can command significant margins, often rivalling those of the major technology companies.7
The growth of the luxury goods sector is supported by the rise and rise of the Asian middle class. Asia is expanding fast, with the IMF forecasting growth of 5.2% for Asia for 2024, and another 4.9% in 2025. This is more than double the projections for developed market economies (1.7% and 1.8% respectively).8 This is creating a new layer of wealth in Asia, with around 1.5bn people joining the middle class by 2030.9 These emerging consumers have helped support the growth of the European luxury goods sector. In this way, investing in luxury goods is a compelling way to play economic growth across Asia.
It is worth saying that while the long-term outlook is good, with all long-term investment themes, there will inevitably be periods of weakness. The luxury goods sector has just experienced a more difficult period, with some weakness in Chinese demand. During these times, the skill and competence of the management team makes a significant difference. Luxury goods companies tend to be well-run, with long-established management teams and experience of managing through downturns in the sector.
Healthcare
The fund also invests in healthcare companies. These are supported by ageing populations across Europe, which are creating more demand for medical products and health services. There are also a number of breakthrough treatments emerging in areas such as obesity, gene therapy and cancer. GLP 1s were the stand-out development of 2023, with drugs such as Wegovy and Ozempic coming to market and producing dramatic results in the treatment of obesity. A number of European healthcare companies have a strong pipeline of growth as they tackle these important areas.
In the end, we believe these areas of structural growth can transcend short-term economic and political factors in Europe, and create diverse opportunities for investors looking at European equities. On the BlackRock Greater European Trust, this is where we focus our attention.
1 MarketWatch - CAC40 index - 9 July 2024
2 European Commission - European Chips Act - January 2024
3 CNBC - Europe approves its $47bn answer to Biden’s Chips Act - 19 April 2023
4 FT - Europe’s new success stories are built on high luxury, not high tech - 4 June 2023
5 Companies market cap - Largest companies in the EU by market capitalization - 9 July 2024
6 CNBC - Luxury goods giant LVMH becomes the first European company to surpass $500 billion in market value - 24 April 2023
7 FT - Europe’s new success stories are built on high luxury, not high tech - 4 June 2023
8 IMF - Global Economic Outlook - April 2024
9 WE Forum - This chart shows the rise of the Asian Middle Class - 13 July 2020
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.
Trust-specific risks
BlackRock Greater Europe Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Liquidity Risk
Counterparty Risk
The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk
The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets
Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Gearing Risk
Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
Liquidity Risk
The Fund's investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Fund may not be able to realise the investment at the latest market price or at a price considered fair.
Important Information
In the UK: this is issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.
UK Investment Trust Funds: This document is marketing material. The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.
Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
The investment trusts in this document currently conduct their affairs so that their securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to nonmainstream investment products and intend to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are securities issued by investment trusts. Investors should understand all characteristics of the funds objective before investing. For information on investor rights and how to raise complaints please go to https://www.blackrock.com/corporate/compliance/investor-right available in local language in registered jurisdictions.
BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.
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