BlackRock Greater Europe Investment Trust — Remaining selective in search for quality growth

BlackRock Greater Europe Investment Trust (LSE: BRGE)

Last close As at 20/06/2024

GBP6.24

5.00 (0.81%)

Market capitalisation

GBP624m

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Research: Investment Companies

BlackRock Greater Europe Investment Trust — Remaining selective in search for quality growth

BlackRock Greater Europe Investment Trust (BRGE) manager Stefan Gries seeks high-quality growth stocks that he can hold for the long term. The manager prides himself on being an ‘investor in businesses, not a trader in shares’ and stresses that his selective approach of focusing on the best businesses that are based in Europe means that investors do not need to have a positive view on the European economy to consider the trust. BRGE has a solid five- and 10-year record of outperformance versus the Europe ex-UK market, despite a difficult period in 2022 when growth stocks came under pressure in a rising interest rate environment. The trust also ranks favourably versus the averages of its peers in the AIC Europe sector over the last one, three, five and 10 years.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

BlackRock Greater Europe Investment Trust

Remaining selective in search for quality growth

Investment trusts
European equities

9 October 2023

Price

492.0p

Market cap

£496m

Total assets

£560m

NAV*

528.5p

Discount to NAV

6.9%

*Including income. At 5 October 2023.

Yield

1.3%

Ordinary shares in issue

100.8m

Code/ISIN

BRGE/GB00B01RDH75

Primary exchange

LSE

AIC sector

Europe

Financial year end

31 August

52-week high/low

563.0p

408.5p

NAV* high/low

585.2p

437.3p

*Including income

Net gearing (at 31 August 2023)

5.1%

Fund objective

BlackRock Greater Europe Investment Trust’s objective is to achieve capital growth, primarily through investment in a focused portfolio of large-, mid- and small-cap European companies. It aims to achieve a net asset value total return in excess of a broad index of European ex-UK equities (in sterling terms).

Bull points

Proven track record, with above-average NAV total returns in the AIC Europe sector over one, three, five and 10 years.

Portfolio has well diversified revenue streams from different geographies and sectors.

Very well-resourced team, backed up by strong risk-management oversight.

Bear points

Performance can struggle in a market driven by macroeconomic factors rather than company fundamentals.

Relatively concentrated portfolio.

Modest dividend yield.

Analyst

Mel Jenner

+44 (0)20 3077 5700

BlackRock Greater Europe Investment Trust is a research client of Edison Investment Research Limited

BlackRock Greater Europe Investment Trust (BRGE) manager Stefan Gries seeks high-quality growth stocks that he can hold for the long term. The manager prides himself on being an ‘investor in businesses, not a trader in shares’ and stresses that his selective approach of focusing on the best businesses that are based in Europe means that investors do not need to have a positive view on the European economy to consider the trust. BRGE has a solid five- and 10-year record of outperformance versus the Europe ex-UK market, despite a difficult period in 2022 when growth stocks came under pressure in a rising interest rate environment. The trust also ranks favourably versus the averages of its peers in the AIC Europe sector over the last one, three, five and 10 years.

Long-term NAV outperformance versus the Europe ex-UK market

Source: Refinitiv, Edison Investment Research

Why consider BRGE?

BRGE is a relatively concentrated, high-conviction, low-turnover fund with a greater than five-year holding period. New positions are only considered after thorough fundamental research and if they fulfil the following criteria: a unique aspect such as a product or service; a sustainable high return on capital and strong free cash flow conversion; the ability to deploy cash in high-return operations; and a high-quality management team. Gries only considers selling a position if there is a change in a company’s original investment thesis, a business is fully valued or if a superior investment opportunity is identified.

European equities remain attractively valued versus history in both absolute and relative terms, and the region is unloved by global investors as witnessed by a continuation in industry-wide negative fund flows. This creates an interesting opportunity, as a change in investor sentiment, perhaps due to economic improvement or a peak in the interest rate cycle, could provide a positive catalyst for the performance of European stocks. There is also potential for BRGE to be afforded a higher valuation as its discount is wider than its one-, three-, five- and 10-year averages.

Gries has the opportunity to invest in companies located in emerging European countries. However, given his highly selective approach and that Russia is now ‘uninvestable’ following the invasion of Ukraine, all of BRGE’s holdings are in developed European countries.

BRGE: Positive record suggests trust is worth a look

BRGE’s ability to invest across the whole of Europe is a differentiating feature of the trust and Gries has a long-term focus, avoiding short-term market ‘noise’; he emphasises that he is an ‘investor in businesses, not a trader in shares’. The manager looks to align himself with the best management teams in the region that can generate long-term value for shareholders.

This approach has proved successful given the trust’s outperformance versus its benchmark and the average of its peers in the AIC Europe sector.

Recent development

On 28 September 2023, BRGE’s board announced that Alexandra Dangoor would be joining lead manager Gries as co-manager of the trust with effect from the close of business on 29 September 2023. The two managers have worked closely together in recent years as Dangoor joined the BlackRock fundamental European equity team in 2019 after two years in the company’s graduate rotation program where she was an analyst in the natural resources and European equity teams. Her experience in the European equity team has enabled Dangoor to develop a deep understanding of the philosophy of running concentrated, high conviction, low turnover portfolios. BRGE’s investment objective and policy is unchanged following the appointment.

Upside/downside capture

Exhibit 1: BRGE’s upside/downside capture over the last 10 years

Source: Refinitiv, Edison Investment Research. Note: Cumulative upside (downside) capture calculated as the geometric average NAV total return (TR) of the fund during months with positive (negative) benchmark total returns, divided by the geometric average benchmark total return during these months. A 100% upside (downside) indicates that the fund's TR was in line with the benchmark’s during months with positive (negative) returns.

Over the last decade to 4 October 2023, BRGE’s cumulative upside capture was 115%, illustrating that the trust is likely to outperform the market in months where European ex-UK shares rally. The downside capture was 112%, suggesting BRGE tends to underperform to a lesser extent in a falling market. However, it is important to note that, the cumulative downside capture has recently increased due to a period of underperformance. Looking at the data for 10 years to the end of August 2023, the upside capture was 114%, while the downside capture was 105%. This favourable risk/reward profile is likely to suit investors seeking to protect their capital, while gaining exposure to an asset class that has generated excess returns over the long term compared with other major asset classes such as bonds or cash.

The lead manager’s view on the current investment backdrop

Gries comments that there is a disconnect between hard and soft economic data in Europe, as while purchasing manager indices and other leading indicators are weak, speaking with companies, the environment does not appear to be that bad. While Germany could technically be in a recession, the manager notes that employment is at a record high, and travel bookings and demand for other consumer services is very robust following COVID-19. Looking at the wider region, companies are nearing the end of their inventory destocking cycles following supply chain issues during the global pandemic. Gries suggests that while commentators have been calling for a hard recession in Europe over the last year, this has not materialised as the ingredients are not in place for such an outcome given that real wages are rising, employment in Europe is very strong and corporate balance sheets are healthy.

The manager emphasises his view that an investor needs to consider Europe on a stock-by-stock basis as it is difficult to take a positive view on the region as a whole. BRGE has a relatively concentrated portfolio, so it is important to avoid weak companies and sectors. European stocks performed very strongly in H123; however, global investors are still defensively positioned and underweight Europe. Gries highlights that there are some positive trends in the region: for example, he says that a capex renaissance is just beginning, led by reshoring, automation, electrification and demand for electric vehicles and alternative energy. The manager believes that the US Inflation Reduction Act is also positive for European multinational companies that have significant operations in the country.

European equity valuations

European equities look attractively valued in both absolute and relative terms. The Datastream Europe Index is trading on a forward P/E multiple of 12.0x, which is an 18.6% discount to its 14.7x 10-year average. In relative terms, this index is trading at an 18.5% forward P/E discount to the Datastream World Index, which is noticeably much wider than the 5.7% 10-year average discount.

The performance of indices in sterling terms is shown in Exhibit 2. While, in aggregate, European shares have outperformed those in the UK over the last 10 years, both regions have significantly lagged the US market, in part due to the performance of US large-cap technology companies.

Exhibit 2: Performance of indices over last 10 years (£)

Source: Refinitiv, Edison Investment Research

Current portfolio positioning

It must be remembered when considering the breakdown of BRGE’s portfolio that the geographic and sector weightings are the outcome of Gries’s bottom-up stock selection. His unconstrained approach is evidenced by several notable variances compared with the reference index.

Exhibit 3: Portfolio geographic exposure versus reference index (% unless stated)

Portfolio end-
August 2023

Portfolio end-
August 2022

Change
(pp)

Active weight vs index (pp)

Switzerland

20.2

17.2

2.9

0.7

France

18.9

14.9

4.0

(4.4)

Denmark

17.9

20.3

(2.4)

11.8

Netherlands

17.3

17.1

0.1

8.6

UK

6.1

7.1

(1.0)

6.1

Ireland

5.4

1.1

4.3

4.8

Sweden

4.5

6.4

(1.9)

(1.3)

Italy

4.1

6.2

(2.1)

(1.4)

Spain

2.4

2.4

(0.0)

(2.8)

Other

3.4

7.2

(3.8)

(22.2)

Total

100.0

100.0

Source: BRGE, Edison Investment Research. Note: Rebased for net current assets/liabilities.

As shown in Exhibit 3, over the year to 31 August 2023, the largest changes in BRGE’s geographic exposure were higher allocations to Ireland (+4.3pp) and France (+4.0pp) with lower weights in Denmark (-2.4pp) and Italy (-2.1pp). Versus the reference index, the largest active weights were overweight allocations to Denmark (+11.8pp) and the Netherlands (+8.6pp) with a notable underweight exposure to ‘other’ countries (-22.2pp).

Exhibit 4: BRGE and reference index geographic breakdowns at 31 August 2023

Source: BRGE, Edison Investment Research

Perhaps of more interest is an analysis of BRGE’s sector breakdown (Exhibit 5). Over the 12 months to end-August 2023, the largest changes were a higher technology weighting (+7.7pp) and lower allocations to financials (-3.6pp) and healthcare (-3.3pp).

Exhibit 5: Portfolio sector exposure versus reference index (% unless stated)

Portfolio end-
August 2023

Portfolio end-
August 2022

Change
(pp)

Active weight
vs index (pp)

Technology

23.5

15.7

7.7

14.3

Industrials

22.7

21.8

0.8

5.4

Consumer discretionary

20.7

19.5

1.2

7.1

Healthcare

18.1

21.4

(3.3)

1.5

Financials

8.2

11.8

(3.6)

(9.1)

Consumer staples

4.4

6.5

(2.1)

(4.5)

Basic materials

2.6

3.3

(0.8)

(2.0)

Real estate

0.0

0.0

0.0

(1.0)

Telecommunications

0.0

0.0

0.0

(3.1)

Utilities

0.0

0.0

0.0

(4.2)

Energy

0.0

0.0

0.0

(4.3)

Total

100.0

100.0

Source: BRGE, Edison Investment Research. Note: Rebased for net current assets/liabilities.

Exhibit 6: BRGE and reference index sector breakdowns at 31 August 2023

Source: BRGE, Edison Investment Research

There are three sectors where the trust has notable overweight exposures: technology (+14.3pp), consumer discretionary (+7.1pp) and industrials (+5.4pp). Its largest underweight positions are financials (-9.1pp) and consumer staples (-4.5pp). There are also four sectors not represented in BRGE’s portfolio as the stocks do not meet the manager’s quality growth criteria. Together, the energy, utilities, telecom and real estate sectors make up 12.6% of the reference index; a large number of the constituents of the first three sectors could be considered ‘old economy’ stocks.

At end-August 2023, BRGE’s top 10 holdings, across a range of subsectors, made up 53.4% of the fund, which was broadly in line with 53.7% a year before; seven positions were common to both periods. Analysis from Morningstar shows that the trust’s portfolio is relatively concentrated versus its peers as it has the second-highest weighting in its top 10 holdings of the seven funds in the AIC Europe sector.

Exhibit 7: Top 10 holdings (at 31 August 2023)

Company

Country

Subsector

Portfolio weight %

31 Aug 2023

31 Aug 2022*

Novo Nordisk

Denmark

Pharmaceuticals & biotechnology

9.3

8.4

LVMH Moët Hennessy Louis Vuitton

France

Luxury goods

7.3

7.1

ASML Holding

Netherlands

Technology hardware & equipment

6.7

7.4

RELX

UK

Media

5.5

6.0

DSV Panalpina

Denmark

Industrial transportation

4.4

5.0

Lonza Group

Switzerland

Pharmaceuticals & biotechnology

4.4

5.4

Hermès International 

France

Luxury goods

4.2

3.6

STMicroelectronics

Switzerland

Semiconductors

4.1

N/A

BE Semiconductor Industries

Netherlands

Semiconductors

4.0

N/A

Safran

France

Aerospace & defence

3.5

N/A

Top 10 (% of portfolio)

53.4

53.7

Source: BRGE, Edison Investment Research. Note: *N/A where not in end-August 2022 top 10.

BRGE’s largest position, Novo Nordisk, has been in the portfolio for more than six years. In August 2023, the company’s SELECT trial showed that its Wegovy weight-loss drug can decrease the risk of cardiovascular events by 20%. This is important given the high prevalence of deaths from cardiovascular diseases, which are very expensive to treat. Wegovy could be included in government programmes, although demand is so high that the company is currently capacity constrained. US competitor Eli Lilly has a similar drug to Wegovy in Phase III clinical trials, but the consensus view is that the obesity market is large enough to accommodate both pharma companies.

Recent portfolio activity

There have been no new holdings or significant disposals in the fund since our last update, which was published in June 2023.

As shown in Exhibits 5 and 6, at the end of August 2023, technology was BRGE’s largest sector weighting and had increased over the prior 12 months. This was due to both actively adding to the trust’s technology holdings, primarily funded by higher gearing, and from share price appreciation. BRGE has four semiconductor/equipment stocks: ASM International, ASML Holding, BE Semiconductor Industries and STMicroelectronics. Gries considers it is an exciting time for the sector, with high demand for its market-leading technologies. The outlook for chip manufacturing improved significantly following NVIDIA’s comments in Q223 about very high demand for semiconductors due to the growth in artificial intelligence and ChatGPT.

Performance: Above-average NAV returns versus peers

BRGE is the third largest of the seven funds in the AIC Europe sector (Exhibit 8). The trust’s NAV total returns are above average over the last one, three, five and 10 years, ranking third, fourth, first and second respectively. A holding in low-cost payments provider Adyen particularly detracted from BRGE’s performance in August 2023. The company reported earnings that missed consensus expectations, in part due to increased price competition in North America, which led to a 39% decline in its stock price. A difficult performance period in 2022, when growth stocks de-rated, has also negatively affected the trust’s relative positioning over the last three years. Gries comments that some of BRGE’s peers have a value bias rather than a growth bias, so are likely to have performed relatively better last year. None of the funds in the AIC Europe sector are trading at a premium to NAV. BRGE currently has the second-highest valuation in the peer group. Its ongoing charge is above average, its level of gearing is below the mean and, unsurprisingly given its capital growth rather than income objective, the trust has a below-average dividend yield.

Exhibit 8: AIC Europe peer group at 6 October 2023*

% unless stated

Market cap (£m)

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield

BlackRock Greater Europe

496.0

17.0

15.9

57.0

164.8

(8.1)

1.0

No

105

1.3

Baillie Gifford European Growth

295.1

2.2

(26.0)

3.6

42.8

(14.2)

0.6

No

115

0.8

European Opportunities Trust

761.3

11.6

13.2

9.7

124.1

(10.1)

1.0

No

105

0.4

Fidelity European Trust

1,340.6

14.4

30.8

55.9

165.3

(6.7)

0.8

No

115

2.3

Henderson European Focus Trust

329.8

19.8

27.0

49.8

160.1

(11.9)

0.8

No

105

2.8

Henderson EuroTrust

283.9

18.8

12.1

42.4

145.6

(13.5)

0.8

No

104

2.8

JPMorgan European Growth & Inc

386.9

15.0

33.2

39.1

123.3

(11.9)

0.7

No

107

4.7

Simple average

556.2

14.1

15.2

36.8

132.3

(10.9)

0.8

108

2.2

BRGE rank in sector (7 funds)

3

3

4

1

2

2

6

4

5

Source: Morningstar, Edison Investment Research. Note: *Performance to 6 October 2023 based on ex-par NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

Exhibit 9: Investment trust performance to 30 September 2023

Price, NAV and index total return performance, one-year rebased

Price, NAV and index total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

Exhibit 10 shows BRGE’s relative performance. It has outperformed its reference index over the last five and 10 years in both NAV and share price terms. The trust has significantly outpaced the performance of UK shares over the last five and 10 years but has not kept up with the world market, which is dominated by the US (70% of the MSCI World Index) over the mid and long term.

Exhibit 10: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to reference index

(4.3)

(6.0)

(5.0)

1.4

(10.8)

9.0

18.0

NAV relative to reference index

(3.7)

(5.5)

(4.5)

0.8

(9.1)

9.7

20.9

Price relative to CBOE UK All Companies

(7.4)

(9.4)

(7.3)

6.7

(19.5)

24.6

48.6

NAV relative to CBOE UK All Companies

(6.9)

(9.0)

(6.9)

6.1

(18.0)

25.4

52.1

Price relative to MSCI World

(4.7)

(8.0)

(10.2)

9.0

(15.7)

(4.1)

(16.9)

NAV relative to MSCI World

(4.2)

(7.6)

(9.8)

8.4

(14.1)

(3.4)

(14.9)

Source: Refinitiv, Edison Investment Research. Note: Data to end-September 2023. Geometric calculation.

Gries highlights that although 2022 was a tough period for growth investors, the investment backdrop has improved considerably since then. Over the last 12 months, technology has been by far the largest positive contributor to BRGE’s performance, including the trust’s holdings in BE Semiconductor Industries and ASM International. European semiconductor manufacturers and equipment companies have performed well on an improved industry outlook and are recognised for having world-leading technologies. The luxury goods sector has been a positive contributor to the trust’s performance with holdings including Hermès International, Ferrari and LVMH Moët Hennessy Louis Vuitton. However, recently the luxury goods stocks have struggled in response to poor Chinese economic data; this is despite the resilience of high-end consumers. BRGE has benefited from a lack of exposure to large defensive stocks such as Nestlé and Roche Holding that have performed relatively poorly.

Positions that have detracted from the trust’s performance over the last 12 months include biopharma life science companies such as ChemoMetec, Lonza Group and Polypeptide Group. These stocks performed very strongly during COVID due to heightened demand for their products. Their businesses have softened in a weaker economic and biotech funding environment and, like other industries, have been working through an inventory cycle. ChemoMetec’s CEO left abruptly for personal reasons, although having met the company’s new CEO, Gries is happy to continue to hold BRGE’s ChemoMetec position.

Exhibit 11: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

Reference index (%)

CBOE UK All Companies (%)

MSCI World
(%)

30/09/19

8.7

6.9

6.3

2.7

8.4

30/09/20

20.0

20.6

0.4

(17.9)

5.8

30/09/21

47.7

37.0

22.0

28.5

24.1

30/09/22

(36.6)

(30.0)

(12.8)

(3.4)

(2.5)

30/09/23

22.2

21.5

20.5

14.5

12.1

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

Dividends: Continuation of progressive policy

BRGE’s annual dividend has grown every year since the trust was launched in 2004 and over the last five years has compounded at an annual rate of 3.9%. Distributions are made twice a year in May and December. Typically, most of the trust’s income is generated in the second half of the financial year. So far in FY23, an interim dividend of 1.75p per share has been announced, which is in line with the FY22 interim payment. At the end of H123, BRGE had c £5.8m of revenue reserves, which is c 0.9x the last annual dividend.

Exhibit 12: Dividend and revenue history since FY13

Source: BRGE, Edison Investment Research

Valuation: No sign of returning to a premium

Having regularly traded at a premium for most of 2021, BRGE now trades at a discount in a broad range of 2% to 8% (Exhibit 13). This situation is not unusual, as many investment trusts are trading on wider discounts than their historical averages in an environment of elevated investor risk aversion. BRGE’s 6.9% discount to cum-income NAV is towards the higher end of its 1.7% to 8.0% range of discounts over the last 12 months. Over the last one, three, five and 10 years, the trust has traded at average discounts of 5.4%, 2.3%, 3.0% and 3.5%, respectively.

Renewed annually, BRGE’s board has the authority to allot up to 10% or repurchase up to 14.99% of the trust’s shares. There are also discretionary semi-annual tender offers for up to 20% of shares outstanding, although none have been undertaken since November 2018.

Exhibit 13: Discount over three years (%)

Exhibit 14: Buybacks and issuance

Source: Refinitiv, Edison Investment Research

Source: Morningstar, Edison Investment Research

Exhibit 13: Discount over three years (%)

Source: Refinitiv, Edison Investment Research

Exhibit 14: Buybacks and issuance

Source: Morningstar, Edison Investment Research

Fund profile: Broad European equity exposure

BRGE was launched in September 2004 and is listed on the Main Market of the London Stock Exchange. On 21 December 2022, the board announced that Stefan Gries would become BRGE’s sole manager with immediate effect. Sam Vecht, the trust’s former co-manager, stepped down; he had been responsible for the trust’s modest emerging Europe weighting.

Gries aims to generate long-term capital growth from a focused portfolio of European equities, across the market cap spectrum, although most of the fund will be invested in companies with a market cap above €5bn. BRGE’s performance is measured against a broad Europe ex-UK index. The fund typically has 35–45 high-conviction positions and there are no constraints on sector exposure. Up to 25% of the portfolio may be held in emerging European markets (currently 0%), while up to 5% may be held in unquoted securities (currently 0%); together these two exposures may not exceed 25% of the fund. Gries may invest in debt securities (up to 20% of the portfolio – none currently held) and derivatives are permitted for efficient portfolio management. Maximum gearing of 15% of NAV at the time of drawdown is permitted.

Investment process: Fundamental stock selection

BRGE’s stocks are selected on a bottom-up basis. Gries can draw on the broad resources of BlackRock’s Fundamental Equity division; the European Equity team alone has 20 fund managers and analysts. The first step of the investment process is idea generation, which is important in ensuring there is a continuous flow of new ideas entering the proprietary research process. A research pipeline is in place to make sure that team resources are used efficiently and to take advantage of the most promising investment opportunities.

Analysts undertake thorough industry and company analysis, looking at a firm’s market dynamics, revenue drivers, financial statements, valuations and risks to the investment thesis. It is important to understand the factors that influence a company’s share price and what the stock market is anticipating or may be missing. A proprietary research template is used to provide a consistent approach and researched stocks are assigned a rating between 1 (strong buy) and 5 (sell), while constructive debate between team members is actively encouraged.

There are four primary investment criteria when assessing a potential addition to the fund: a unique aspect – such as a product, brand or contract structure – which allows sustainable returns; options to deploy cash in areas of high and sustainable returns; a high and predictable return on capital and strong free cash flow conversion; and a quality management team with a clearly defined strategy and a strong track record of value creation.

BRGE’s portfolio currently has 34 holdings, selected from an investible universe of more than 2,000 companies. Portfolio turnover in recent years was less than 20%, which implies an average holding period longer than five years. Stocks may be sold if there is a fundamental change in the investment case that will negatively affect a company’s earnings and cash flow, if it has reached its estimated valuation target, or if a better investment opportunity is identified. While BRGE’s portfolio is concentrated, the manager and his team are risk aware and work closely with BlackRock’s independent Risk and Quantitative Analysis group to ensure the trust’s portfolio risk is closely monitored and understood.

BRGE’s approach to ESG

Gries uses ESG information when conducting research and due diligence on new investments, and also when monitoring investments in the portfolio, believing that this can help enhance risk-adjusted returns. He employs both quantitative and qualitative assessments, focusing on areas including environmental risks, corporate structures and capital allocation. Given its size, BlackRock has unparalleled access to company management teams, and its managers seek to understand how firms approach ESG risks and opportunities and what potential impact these may have on their financial returns; they can encourage change when required. Gries believes that a company’s ability to manage ESG matters demonstrates strong leadership and good governance that is essential to sustainable growth. The criteria applied for BRGE’s stock selection means the portfolio is made up of businesses that score well from an ESG perspective and Gries highlights the importance of a strong corporate culture within investee companies in terms of creating value for shareholders.

Gearing

At end-H123, BRGE had an available overdraft facility of the lower of £60m (reduced from £70m on 3 October 2022) or 15% of NAV, which is the maximum permitted at the time of drawdown. At end-August 2023, net gearing was 5.1%; this compares with a historical range of c 15% geared to c 10% net cash (the typical range is net gearing in a range of 5–8%). The manager does not try to time the market; the trust’s level of gearing is driven by the opportunities available for either current or new holdings.

Fees and charges

The board negotiated a reduction in BRGE’s annual management fees. From 1 January 2023, BlackRock is paid 0.85% per year of NAV on assets up to £350m (based on the NAV at the end of each month) and 0.75% per year of NAV on assets above this level. Previously the fee was a flat 0.85% of NAV per year. It is allocated 80:20 between the trust’s capital and revenue accounts and no performance fee is payable. In FY22, ongoing charges were 0.98%, which was a 4bp reduction compared with 1.02% in FY21.

Capital structure

BRGE is a conventional investment trust, with one class of share. There are currently 100.8m ordinary shares in issue, with a further 17.1m held in treasury. Over the last 12 months the trust had an average daily trading volume of c 96k shares.

Exhibit 15: Major shareholders

Exhibit 16: Average daily volume

Source: Bloomberg. Note: At 15 September 2023.

Source: Refinitiv. Note: 12 months to 6 October 2023.

Exhibit 15: Major shareholders

Source: Bloomberg. Note: At 15 September 2023.

Exhibit 16: Average daily volume

Source: Refinitiv. Note: 12 months to 6 October 2023.

The board

Exhibit 17: BRGE’s board of directors

Board member

Date of appointment

Remuneration in FY22

Shareholdings at end-FY22

Eric Sanderson (chairman since Nov 2016)

April 2013

£42,500

4,000

Peter Baxter*

April 2015

£33,500

11,000

Davina Curling

December 2011

£29,000

Nil

Paola Subacchi

July 2017

£29,000

7,017

Ian Sayers

February 2022

£16,071

Nil

Source: BRGE. Note: *Peter Baxter is chair of the audit and management engagement committee.

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This report has been commissioned by BlackRock Greater Europe Investment Trust and prepared and issued by Edison, in consideration of a fee payable by BlackRock Greater Europe Investment Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by BlackRock Greater Europe Investment Trust and prepared and issued by Edison, in consideration of a fee payable by BlackRock Greater Europe Investment Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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