REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

17/04/2025 18:30

The information contained in this release was correct as at 31 March 2025.
Information on the Company’s up to date net asset values can be found on the
London Stock Exchange website at:

 

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

 

 

BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)

All information is at 31 March 2025 and unaudited.

Performance at month end with net income reinvested
 

                              One Month  Three Months  One Year  Three Years  Launch (20 Sep 04)  
                                                                                                  
 Net asset value (undiluted)  -10.0%     -1.9%         -13.5%    8.2%         708.4%              
 Share price                  -9.7%      -1.3%         -14.6%    0.7%         666.0%              
 FTSE World Europe ex UK      -2.6%      7.6%          3.8%      28.4%        471.8%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      573.12p     
 Net asset value (including income):  575.31p     
 Share price:                         538.00p     
 Discount to NAV (including income):  6.5%        
 Net gearing:                         5.4%        
 Net yield 1 :                        1.3%        
 Total assets (including income):     £555.6m     
 Ordinary shares in issue 2 :         96,567,687  
 Ongoing charges 3 :                  0.95%       

 

1  Based on an interim dividend of 1.75p per share and final dividend of
5.25p per share for the year ended 31 August 2024.

2  Excluding 21,361,251 shares held in treasury.
3  The Company’s ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating expenses
excluding finance costs, direct transaction costs, custody transaction
charges, VAT recovered, taxation, write back of prior year expenses and
certain non-recurring items for the year ended 31 August 2024.

 

                          
 Sector Analysis          Total Assets (%)  
 Industrials              31.1              
 Consumer Discretionary   21.6              
 Technology               16.9              
 Health Care              12.5              
 Financials               9.0               
 Basic Materials          7.1               
 Real Estate              2.1               
 Net Current Liabilities  -0.3              
                          -----             
                          100.0             
                          =====             
                                              
 Country Analysis         Total Assets (%)  
 France                   16.4              
 Netherlands              16.2              
 Switzerland              15.0              
 Germany                  11.6              
 Denmark                  7.6               
 United Kingdom           6.8               
 Sweden                   6.2               
 Ireland                  5.0               
 Italy                    4.4               
 United States            4.2               
 Belgium                  2.6               
 Norway                   2.3               
 Finland                  2.0               
 Net Current Liabilities  -0.3              
                          -----             
                          100.0             
                          =====             
                                            

 


 

 Top 10 holdings                  Country         Fund %  
 RELX                             United Kingdom  6.8     
 Safran                           France          6.1     
 Novo Nordisk                     Denmark         5.1     
 Hermès                           France          5.0     
 Ferrari                          Italy           4.3     
 Compagnie Financière Richemont   Switzerland     4.3     
 Linde                            United States   4.2     
 Schneider Electric               France          4.2     
 ASML                             Netherlands     4.2     
 SAP                              Germany         4.1     
                                                          

 

Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing
the Investment Manager noted:

 

During the month, the Company’s NAV declined by 10.0% and the share price
fell by 9.7%. For reference, the FTSE World Europe ex UK Index returned -2.6%
during the period.

 

In March, Europe ex UK markets experienced a decline, marked by severe
volatility, ongoing narrow market leadership and significant changes on both
sides of the Atlantic.

 

The better backdrop for cyclicals peaked in mid-February and, since then,
defensives have generally outperformed. Value has outperformed Growth by a
meaningful amount.

 

Concerns around the US economy, particularly tariffs and federal spending
cuts, significantly influenced market performance, leading to a more
pessimistic outlook for US consumers, with confidence hitting a 12-year low
(US Conference Board Consumer Confidence Index). This dampened consumer
outlook was evident in data in more recent weeks and flagged by companies
during the month. However, it remains to be seen as to whether this has been
influenced by the more volatile political backdrop.

 

Conversely, Germany's substantial stimulus announcements, including a spending
package of at least EUR 1 trillion aimed at defence and infrastructure,
provided a more positive outlook for Europe.

 

The month saw limited major company releases, leaving the market largely
driven by macroeconomic factors. Defence stocks, banks and companies likely to
benefit from German infrastructure spending showed the strongest performance,
while defensive areas such as utilities also performed well. Cyclical and
consumer-exposed sectors like consumer discretionary, real estate and IT fell
during the month.

 

The Company underperformed its reference index in March, with an underweight
to defensive sectors and an overweight to global high-quality businesses
detracting from performance.

 

Sector allocation provided negative attribution primarily driven by the
Company’s overweight to consumer discretionary given emerging concerns
around the US consumer. An underweight to financials was negative for returns
as investors favoured domestically exposed, attractively valued assets.

 

Our underweight position in utilities also negatively impacted performance in
March. In a rapid turnaround, utilities have shifted from deeply oversold
levels compared to the European market to currently overbought levels. In
mid-February, utilities were lagging the index materially on a one-year view,
but now they are outperforming. This circa 15% outperformance over six weeks
has only been seen five times in the past – every time during market
crashes. This significant change in sentiment shows the volatility and pace of
trading we are witnessing in markets. On the positive side, the Company
benefited from a higher exposure to industrials.

 

Shares in Novo Nordisk were the largest detractor during the month given
pressure on changing perceptions of the obesity market’s potential growth.
This comes both as a product of the Cagrisema data release, showing diabetic
patients still did not titrate to highest doses, as well as the longer than
expected overhang of compounders in the US which have taken some near-term
market share. Whilst the latter likely resolves through the courts, it may
weigh on Novo’s prescription data in 2025 for longer than anticipated. We
believe there is upside from the diabetes franchise, as well as optionality on
other diseases, but believe the focus on obesity may hold greater influence on
the equity return potential in the near term. The greater uncertainty here has
led to a significant reduction in position size within the portfolio. We are
mindful shares currently trade on a patent cliff multiple of around 8x end of
decade P/E, despite the fact that growth will still likely outstrip other
European pharmaceutical players. This suggests a higher risk premium on these
shares given an uncertain backdrop for how obesity sales will evolve and
indeed how geopolitical tensions may impact pharmaceuticals including Novo’s
home country of Denmark.

 

A common theme of top detractors in the month came from the market selling
companies with exposure to the US, particularly in regard to consumer
businesses such as Richemont and Hermès. Adyen detracted for similar reasons
given the payment platform’s dependence on consumer spending and shares were
dragged by the weakening outlook for the US consumer during the month. This
followed strong results during the previous month, with full-year earnings
above expectations and forecasts of higher net revenue growth and margin
expansion in 2025.

 

Semiconductor equipment businesses - ASMI and BE Semiconductor – detracted,
likely on a combination of the market continuing to digest a set of mixed
results in the previous month, as well as suffering from the market continuing
to sell off anything related to AI and data centres. While we are disappointed
in the near-term results versus expectations, these businesses’ tools are
used in wide reaching applications – back-end and front-end - outside of the
AI theme where a volume recovery has been long in the waiting. Thus far,
management expect it to materialise in H2 2025 and both also reported positive
order book developments in their respective leading-edge technologies of Gate
All Around and Hybrid Bonding. However, this is an area of the market we must
keep an eye on with respect to the influence of tariffs, especially those
imposed in APAC markets.

 

Journals and analytics company RELX, one of the Company’s more defensive
positions, was the top contributor. Shares were able to hold up better than
the market, doing what we would hope to protect relative returns.

 

Not owning a number of the largest reference index underperformers – UBS,
Kering, Infineon – also contributed to active returns.

 

Outlook

 

While near-term uncertainty has increased, we continue to see a resilient
bottom-up picture of both consumers and corporates. In our home market, Europe
is going through a renaissance moment, introducing potential for change with
lasting impact to corporate earnings. We are focused on analysing change as it
relates to positioning the portfolio for the duration earnings-streams we see
likely to be supported for years and decades to come. We believe with some of
the significant changes going on in the market – fiscal policy change,
potential for a Ukraine ceasefire and earnings cycles turning – that the
European equity rally can continue, although given the geopolitical backdrop
this is unlikely to be a straight path. We would expect the shape of market
drivers to change in time, with earnings becoming a larger determinant of
returns as the narrow areas that have been bid up run out of steam.

 

Historically, Europe has been home to many world-class franchises that earn
profits globally, including from the US and China. This remains true, but now
there is a stronger domestic earnings contribution driven by an improved
outlook for the continent.

 

There is potential recovery within rate-sensitive sectors such as
construction, as Europe is currently in a rate-cutting cycle. Economic
strength in Europe has been evident in the periphery—Spain and Italy, but
now there is change in key countries like Germany with a new government
forming and releasing fiscal constraints to stimulate the economy.

 

While the geopolitical landscape is challenging to navigate, especially with
US policy keeping investors on their toes, focusing on changing earnings
streams can help deliver strong long-term outcomes for investors. Overall, we
retain our core exposure to companies with predictable business models, higher
than average returns on capital, strong cash flow conversions and
opportunities to reinvest that cash flow into future growth projects at high
incremental returns.

 

17 April 2025

 

ENDS

 

Latest information is available by typing www.blackrock.com/uk/brge on the
internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3
(ICV terminal).  Neither the contents of the Manager’s website nor the
contents of any website accessible from hyperlinks on the Manager’s website
(or any other website) is incorporated into, or forms part of, this
announcement.

 Release (https://mb.cision.com/Main/22396/4137614/3398048.pdf)  



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