BlackRock Greater Europe 29 December 2021

BlackRock Greater Europe (BRGE) follows a highly active approach to European equity investing, able to access companies in both developed and emerging Europe, as well as across a range of market caps. BRGE remains the best performing AIC Europe trust over one, three and five years. This is the direct result of the effective, high conviction, bottom-up approach of its managers: Stefan Gries and Sam Vecht. Despite how turbulent 2021 has been, Stefan and Sam have made few changes to the portfolio, retaining the same low turnover approach as prior years, at 20% over the last year, and continuing to focus on the highest quality growth opportunities Europe can provide. While the duo pays little to no attention to macro-economic or country-specific risk factors, they are aware of near-term inflationary pressures. They highlight that many of the holdings have strong pricing power and can pass on any inflationary shock to their consumers, insulating BRGE. We provide several examples of BRGE’s holdings in our Portfolio section.

BRGE’s strong performance has been predominantly generated by Stefan and Sam’s strong stock selection, with BRGE displaying strong risk-adjusted performance over the last five years. We discuss BRGE’s returns in more detail in Performance. The trust also has strong ESG credentials, as determined by Morningstar, with the team having recently increased the degree of their ESG analysis. BRGE trades on a premium, currently 1.6%, and has done so since the start of 2021, as we describe in Discount.

We think BRGE’s results continue to show the benefits of disciplined stock picking, and Stefan and Sam’s impressive long-term performance record has demonstrated their ability to execute over varying market environments. Their continually low portfolio turnover indicates a high level of conviction, which we believe makes BRGE an attractive choice for long-term investors that have the time horizon to capitalise on the team’s five-year view. We also highlight the advantages BRGE’s expanding team of analysts provides (see Management). The managers can draw upon what they believe is one of the best-resourced European equity teams in the industry, giving the managers an advantage when it comes to stock-picking.

BRGE has seen an expansion in underlying portfolio valuations over 2021, but Stefan and Sam remain sanguine over the issue. While BRGE’s high valuations may be unpalatable for investors concerned with the risk of inflation and interest rate rises, the team believe that the strong pricing power of their companies will largely insulate them from these effects. We add that BRGE’s five-year risk-return statistics indicate its ability to more than compensate investors over past periods of volatility, as well as insulate them during market drawdowns.

We believe that BRGE’s performance has led it to continue to trade on a premium, and note is the only trust to do so in the sector. As long as BRGE continues its sector-leading performance we can see its premium remaining.