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BlackRock Greater Europe Investment Trust: December 2020 update

In this update, Senior Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost and performance of BlackRock Greater Europe Investment Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • Stefan Gries and Sam Vecht have a strong background in developed and emerging European equities
  • We think there are a number of high-quality investors in BlackRock’s European Equity team
  • Performance has been particularly strong over the past year, though this isn’t a guide to future returns

How it fits in a portfolio

BlackRock Greater Europe Investment Trust is a little different to others focused on Europe. While it mostly invests in developed European markets, including Denmark, Switzerland, France and the UK, it can also invest in some emerging European countries, such as Russia and Poland. This part of the trust helps differentiate it from many of its peers, though investing in emerging markets increases risk. Overall the trust could be used as a way to get broad exposure to European companies and form part of a wider investment portfolio focused on long-term growth.

Manager

Stefan Gries and Sam Vecht have managed BlackRock Greater Europe Investment Trust since June 2017 and put their own stamp on the portfolio.

Gries joined BlackRock's European Equity team in 2008 and has since run a number of portfolios. In addition to this trust, he is also lead and co-manager of a number of other European open-ended funds. Prior to joining BlackRock in 2008, he spent two years at Scottish Widows Investment Partnership where he completed a two year graduate programme.

Vecht runs a smaller part of the trust, focusing on the eastern European portion, but has been a co-manager since 2004. He’s also Head of the Emerging Europe & Frontiers team, and responsible for a range of emerging and frontier markets funds. This includes BlackRock Emerging Europe and BlackRock Frontiers Investment Trust. He joined BlackRock in 2000 as part of the Global Emerging Markets team.

There have been a few changes within BlackRock's European team over the past few years. That said, we think there are a number of high-quality individuals in the team, which Gries and Vecht can draw support from.

Process

Gries and Vecht's investment process is all about quality. They look for high-quality companies they believe will grow their earnings over the coming years. They also favour companies that do something unique within their area of the market – this could help them fend off competition and raise prices for products or services that customers can’t get elsewhere. These businesses should also be run by a quality management team that has a good record of reinvesting profits in the business to boost future growth potential.

After taking over in 2017, the managers focused the trust on their highest-conviction ideas, reducing the number of investments. This means each one could have a more meaningful impact on performance, though this increases risk.

The bulk of the trust is managed by Gries, who invests in developed European markets. Vecht takes charge of the rest. He can invest up to 25% of the trust's Net Asset Value (NAV) in emerging European countries, and around 9% is currently invested in these markets.

During the sharp market selloff due to the coronavirus pandemic earlier this year, the managers took advantage by investing in what they believe to be world-class companies at lower share prices. This includes Atlas Copco, which manufactures industrial tools and equipment. According to the managers, its expanding base of installed equipment supports the company’s aftermarket and services business, which gives a high level of growing recurring revenues. The company generates high returns on money reinvested in the business, and is extremely cash generative.

Please note the trust has the ability to use derivatives and gearing (borrowing to invest) with the aim of adding to returns, but this adds risk.

Culture

BlackRock is the largest asset manager in the world, running $160bn of assets globally. The company was founded in 1988 by eight partners including current CEO Larry Fink and is known for both active and passive strategies across the world. Employees at BlackRock are encouraged to hold shares in the company so that they are engaged with helping the company perform well and grow.

Over recent years BlackRock has increased its drive towards stewardship and promoting ESG-based products. This involves direct dialogue with companies on governance issues that have a material impact on sustainable, long-term financial performance. Similarly, the Board of this trust believes that responsible investment and sustainability are integral to the trust's longer-term performance, and works closely with the managers to ensure ESG issues are effectively integrated into the investment process.

Cost

The trust's annual ongoing charge is 1.01%, reducing from 1.08% last year. That said, this is still above the average charge for the AIC's European sector, and makes it one of the more expensive options in the sector. Investors should refer to the latest annual reports and accounts and Key Investor Information for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn’t apply if held in a Fund and Share account.

Performance

The managers have delivered impressive results since Gries was appointed co-manager in June 2017. Over this time the trust has grown 63.6%* in share price terms compared with 16.6% for its benchmark, the FTSE World Europe ex UK Index. Past performance isn't a guide to future returns though.

The past year has been a particularly strong year, with the trust's NAV (Net Asset Value) growing 25.4% and its share price delivering similar impressive returns of 27.7%. The index made a return of 7.3% over the same time. This is over a short time though and performance won’t be the same from year to year.

The managers put this good performance partly down to investments in companies that have proved resilient throughout the pandemic, helped by skilled management teams. Transport and logistics company DSV Panalpina and brewing and beverage company Royal Unibrew are two examples of businesses that were able to hold up well this year, aided by the strong stewardship of their managers.

Other companies that performed well have become direct beneficiaries of the pandemic. Drug manufacturer Lonza Group was one of the top performers over the past year, while biotech company DiaSorin also contributed positively to returns.

It wasn't all plain sailing though, and some companies were negatively impacted by lockdowns and travel restrictions. These include aerospace holding Safran and travel technology company Amadeus IT Group, which both suffered due to widespread travel bans. Gries and Vecht took the time to re-analyse these businesses and speak with their management teams. They subsequently decided to remain invested in both companies. Each one took swift action to reassess costs and strengthen their finances, and the managers believe this puts them in a good position to outperform weaker competitors going forward, though there are no guarantees.

The managers are currently fairly optimistic in their outlook for Europe. That said, they think some sectors will continue to face challenges, and remain focused on looking for businesses they think will fare well over the longer term regardless of what’s going on in the wider economy.

Annual percentage growth
Nov 15 -
Nov 16
Nov 16 -
Nov 17
Nov 17 -
Nov 18
Nov 18 -
Nov 19
Nov 19 -
Nov 20
BlackRock Greater Europe Investment Trust 8.6% 31.1% -1.9% 23.6% 27.7%
FTSE World Europe ex UK 12.1% 25.0% -4.6% 13.7% 7.3%

Past performance is not a guide to the future. Source: *Lipper IM to 30/11/2020.

Find out more about BlackRock Greater Europe Investment Trust including charges

BlackRock Greater Europe Investment Trust Key Information Document

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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