BlackRock Greater Europe Investment Trust plc

About this investment trust

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.

The Company aims to provide capital growth, primarily through investment in a focused portfolio constructed from a combination of the securities of large, mid and small capitalisation European companies, together with some investment in the developing markets of Europe.

Why choose it?

Europe is a rich source of innovation and dynamic capitalism. Active management can uncover its most exciting companies. The Trust invests in global brand leaders, plus smaller companies focused on niche, high growth areas. The Trust looks for high quality, well-capitalised companies with strong management teams that can create real value for shareholders over time. 

Suited to…

This Trust is designed for investors looking to invest in a selection of Europe’s highest quality, fastest-growing companies, irrespective of their size and geography. They must be willing to take on some additional risk to grow their capital over the long term.

Citywire: As at 16 November 2021.
Investment Week: As at 18 November 2021.
Kepler Rating: As at 1 January 2022.

What are the 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.
• Overseas investment will be affected by movements in currency exchange rates.
• Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore the value of these investments may be unpredictable and subject to greater variation.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.

Useful information

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.

Fees & Charges

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ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.

Fund manager commentary

31 January 2025

Comments from the portfolio managers

Please note that the commentary below includes historic information in respect of performance data in respect of portfolio investments, index performance data and the Company’s NAV performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

During the month, the Company’s NAV rose by 9.8% and the share price by 10.3%. For reference, the FTSE World Europe ex UK Index returned 8.2% during the period.

European ex UK markets delivered a strong start to the year. This was driven by a number of strong company results and improving sentiment towards the region. Additionally, the first few days of President Trump's term have, so far, seen fewer tariff announcements than anticipated – although this narrative looks to be changing in the early days of February. Strong market returns are also attributed to a recovery from a weaker H2 2024, with consumer stocks rebounding following better data towards the end of Q4 and into Q1, along with some signs of stabilisation from China.

Whilst we are still at the early stages of Q4 earnings in Europe, the earnings season has, so far, fared better than expected. We would note expectations had been lowered through the year, but that we are now seeing encouraging signs from luxury, banks and life sciences reports coming through.

Towards the end of January, global markets were shaken by news that Chinese company DeepSeek had trained an Artificial Intelligence (AI) model comparable to those developed in Silicon Valley, but at a fraction of the cost, and were offering the technology as open source. While perceived as a shock by markets, the cost improvement was less of a surprise for some of the leaders in the space, who view the decreases in cost as ‘on trend’ with the historical cost curve decrease. What is clear is that this industry is developing very quickly and adoption could follow suit. There are uncertainties that remain around the impact to long-term capital expenditure (capex) plans and the return on this investment, a debate that has been persistent in the market since last year. In the meantime, the hyperscalers have since confirmed strong capex plans for 2025, as the ultimate goal towards Artificial General Intelligence remains a key focus.

The Company outperformed its reference index during the month, driven by both stock selection and sector allocation. In sector terms, the Company’s lower allocation to defensive sectors such as consumer staples was positive for returns as the market moved up strongly. An overweight to both consumer discretionary and technology was also positive. However, a lower exposure to financials detracted.

Strong contribution came from a number of luxury stocks. Richemont was amongst the largest contributors to returns in January, posting strong results with sales increasing by 10%, reaching a record of EUR6.2bn. The strong performance was fuelled by accelerated US spending across all categories and clientele. In Europe, growth was more brand-specific due to efforts to improve visibility and access such as expanding Van Cleef & Arpels into more markets. Despite weaker sales in Asia-Pacific, the lack of further deterioration in China was also seen as a positive. Hermès and LVMH were also amongst the best performers, as the sector continued to perform better on improving data from the US and signs of stabilisation in China.

Within industrials, strong contribution came from engine-maker Safran. Shares had been weak following the capital markets day in December due to some disappointment around the growth targets, particularly in aftermarket. However, since then, there has been strong results and guidance from peers which suggest that those targets are conservative and that overall demand remains strong. Shares in RELX also performed well, with a path to more cost-effective AI beginning to look clearer.

Within financials, private equity firm Partners Group reported solid results for the second half of 2024. The firm reported 5% year-on-year growth in assets under management, reaching USD149bn. Management fees increased by 4%, reflecting sustained demand for bespoke client solutions. The company also maintained a robust exit pipeline, anticipating an increase in performance fees as the exit environment improves.

Following the DeepSeek newsflow, the overall contribution from the technology sector was mixed. Nemetschek was the top performer over the month, reporting a strong set of financial results, driven by significant revenue growth and improved profitability. The company's performance beat expectations, with one-third of the beat attributed to one-off license changes and two-thirds driven by higher-quality subscription growth. Nemetschek is expected to surpass its conservative EBITDA guidance of 28-30%, with mid-teens organic growth guidance likely achievable at 19%. Over the next couple of years, the company anticipates high single-digit upgrades to revenue and low teens upgrades to EBITDA.

On the negative side, Be Semiconductor (BESI) and ASMI detracted during the month as, following the DeepSeek newsflow, investors questioned the potential shift in market dynamics and reduced demand for their products. Similarly, shares in Schneider Electric experienced weakness due to their exposure to data centre growth.

Outlook

The underlying economic conditions in Europe remain solid, with both consumers and corporations in healthy financial positions. The disinflation process is progressing, with the European Central Bank projecting headline inflation to average 2.1% in 2025 and 1.9% in 2026. Globally, rate-cutting cycles have begun, with the Federal Reserve following Europe's lead.

After a long hiatus, capex has returned, supporting a lot of cyclical businesses and potentially driving higher earnings over a multi-year period, which has driven us to maintain our cyclical exposure. There are significant secular opportunities in areas such as the energy transition and advancements in AI.

The luxury sector, having been through two years of normalisation, could potentially start to see improvements in 2025, as resolving US election uncertainty has further improved the economic backdrop in the US. However, it remains crucial to be selective in Europe – defensive exposures are more attractive in the industrials sector, while the consumer staples sector remains very weak.

 Additionally, the European market composition has structurally improved, becoming a higher quality market while valuations are at a record-wide discount relative to the US.

Investor sentiment toward Europe has been subdued, with many favouring an overweight allocation to U.S. equities, which have performed exceptionally well. Nevertheless, Europe presents compelling valuation opportunities. Structural reforms, the possibility of a new government in Germany and economic stimulus from China could help shift sentiment positively. Germany, in particular, is grappling with substantial economic challenges and is in need of significant reform. A market-friendly coalition government could unlock long-delayed investments, making the upcoming February election a key event to watch. That said, our investment approach prioritises company specific opportunities and management teams over a country view or political developments. Our focus lies on industries with robust structural drivers, as these have a more profound impact on long-term outcomes than country-specific factors. A strong U.S. economy, positive real wage growth in Europe, and potential stimulus measures in China could create a supportive backdrop for Europe’s globally oriented companies.

Unless otherwise stated all data is sourced from BlackRock as of 31 January 2025.

Any opinions or forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results.

This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biography

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.

Stefan Gries is co-manager of BlackRock Greater Europe Investment Trust plc. He is head of the European Equity team within the Fundamental Equity division of BlackRock’s Portfolio Management Group. He is co-manager on the European Absolute return (long/short) portfolios, as well as on Pan European and Europe ex UK long-only portfolios. Prior to joining BlackRock in 2008, Stefan spent two years at Scottish Widows Investment Partnership where he completed a two-year graduate programme. Since joining BlackRock, he has worked both as a portfolio manager and as an analyst covering, at various times, energy, pharmaceuticals and insurance on behalf of the European Equity team. He earned an MA in economics and Spanish from the University of St. Andrews in 2005.

Alexandra Dangoor is co-manager of BlackRock Greater Europe Investment Trust plc. Alexandra also has research responsibilities within the team’s financials research pod focused on the European banks and insurers. Alexandra joined the BlackRock Fundamental European Equity Team in 2019 after two years on BlackRock’s graduate rotation programme, where she was an analyst in the Natural Resources and European Equity teams. Alexandra earned a BSc degree in Mathematics and Economics at Bristol University, graduating in 2015, and an MSc in Investment and Wealth Management at Imperial College Business School, graduating in 2016. 

Board of directors

All the Directors are non-executive and independent of the Investment Manager. The Board as a whole constitutes the Audit and Management Engagement Committee.

Eric Sanderson (appointed April 2013) (Chairman) is a chartered accountant and a banker and was chief executive of British Linen Bank from 1989 to 1997 and a member of the management board of Bank of Scotland in his role as head of group treasury operations from 1997 to 1999. He was formerly chairman of MyTravel Group PLC, MWB Group Holdings, Dunedin Fund Managers Limited and Schroder UK Mid Cap Fund plc. He is presently chairman of JPMorgan Emerging Europe, Middle East & Africa Securities Limited.

Peter Baxter (appointed April 2015) has over 30 years’ experience in the investment management industry. He is an executive director of Snowball Impact Management Ltd, a social impact investment organisation, a non-executive director of Civitas Social Housing plc, and a trustee of Trust for London, and was a member of the Financial Reporting Council’s Conduct Committee. Previously he was chief executive of Old Mutual Asset Managers (UK) Ltd and worked for Schroders and Hill Samuel in a variety of investment roles.

Paola Subacchi (appointed July 2017) (Senior Independent Director) is an economist, writer and commentator on the functioning and governance of the international financial and monetary system. She is Professor of International Economics and Chair of the Advisory Board, Global Policy Institute, Queen Mary University of London, visiting professor at the University of Bologna, non-executive director of Scottish Mortgage Investment Trust PLC as well as Founder of Essential Economics Ltd. She writes regularly on Project Syndicate.

Ian Sayers (appointed February 2022) (Chairman of the Audit and Management Engagement Committee) is the former Chief Executive of the Association of Investment Companies (AIC), which he became in 2010 on his promotion from Deputy Director General. Prior to that, he was the AIC’s Technical Director, advising members on areas such as taxation, accounting, company law and regulation, as well as having a key role in its public affairs activity. He qualified as a chartered accountant and chartered tax advisor.

Sapna Shah (appointed 12 December 2023) has 20 years of investment banking experience advising UK companies, including listed REITs and investment companies, on IPOs, equity capital market transactions and mergers and acquisitions. She is a non-executive director of The Association of Investment Companies and a consultant at Panmure Gordon Limited. Prior to this she held senior investment banking roles at UBS AG, Oriel Securities (now Stifel Nicolaus Europe) and Cenkos Securities. She is currently a non-executive director of Supermarket Income REIT plc and BioPharma Credit PLC.