BlackRock Greater Europe Investment Trust (BRGE) aims to generate capital growth from a relatively concentrated portfolio invested across the greater European region. In June 2017, it was announced that Stefan Gries would replace Vincent Devlin as co-manager. He will continue to adopt BRGE’s flexible bottom-up stock selection approach, drawing on the wider resources of BlackRock’s European and emerging markets equity teams, but is reducing the number of holdings and intends opportunistically to make fuller use of the emerging European allocation. The trust is referenced against the FTSE World Europe ex-UK index and its NAV total return has outperformed over three and 10 years and is broadly in line over five years, while lagging over the last 12 months. Although the primary aim is capital growth, BRGE has a progressive dividend policy. Its current dividend yield is 1.7%, which is in line with its peer group average.
Co-managers Gries and Sam Vecht are able to draw on the resources of BlackRock’s experienced investment teams to select a concentrated portfolio of stocks in both developed and emerging Europe. Idea generation is the first step of the process, driven by the knowledge of the investment team, which conducts more than 1,000 company meetings a year. Potential investments form a research pipeline to ensure the best ideas are implemented in the most efficient manner.
The outlook for Europe is looking more favourable based on improving economic growth estimates, which is filtering through to positive company earnings estimate revisions. However, investors should be mindful that equity prices are reflecting this improvement to some extent as valuations are now less attractive than in late-2016; in aggregate, on a forward P/E multiple, stocks are trading at a 23% premium to their 10-year average. Investors seeking exposure to the region may therefore be interested in an actively managed fund with a disciplined stock selection approach.
BRGE’s current 5.3% share price discount to cum-income NAV is broadly in line with the 4.9% average over the last 12 months (range of 2.5% to 9.5%) and compares to the averages of the last three, five and 10 years of 4.3%, 4.0% and 4.5% respectively. The board actively manages the discount via share repurchases and discretionary semi-annual tender offers. BRGE has a progressive dividend policy and has increased its annual dividend every year since the fund was launched; its current dividend yield is 1.7%.