Portfolio Update

The information contained in this release was correct as at 31 October 2020. 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 October 2020 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)	-4.3%	2.9%	15.8%	35.2%	503.1%
Net asset value* (diluted)	-4.3%	3.1%	15.7%	35.2%	503.3%
Share price	-4.1%	-0.7%	14.8%	33.7%	482.6%
FTSE World Europe ex UK	-6.1%	-3.3%	-4.2%	0.8%	251.0%

* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream.
 

At month end

Net asset value (capital only):	453.37p
Net asset value (including income):	453.90p
Net asset value (capital only)1:	453.37p
Net asset value (including income)1:	453.90p
Share price:	434.00p
Discount to NAV (including income):	4.4%
Discount to NAV (including income)1:	4.4%
Net gearing:	10.1%
Net yield2:	1.4%
Total assets (including income):	382.7m
Ordinary shares in issue3:	84,323,101
Ongoing charges4:	1.0%

1  Diluted for treasury shares.
2  Based on an interim dividend of 1.75p per share and a final dividend of 4.40p per share for the year ended 31 August 2020.
3  Excluding 26,005,837 shares held in treasury.
4  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2020.

Sector Analysis	Total Assets (%)		Country Analysis	Total Assets (%)
Technology	24.1		Denmark	19.7
Industrials	21.9		Switzerland	15.0
Health Care	18.4		Netherlands	13.3
Consumer Goods	11.2		France	13.3
Consumer Services	8.5		Germany	7.1
Financials	7.9		Italy	6.0
Basic Materials	3.9		Sweden	5.4
Oil & Gas	3.4		Poland	3.4
Telecommunications	1.7		United Kingdom	3.4
Net Current Assets	-1.0		Israel	2.7
	-----		Russia	2.6
	100.0		Finland	2.3
	=====		Spain	2.3
			Ireland	2.3
			Belgium	2.0
			Greece	0.2
			Net Current Assets	-1.0
				-----
				100.0
				=====

Top 10 Holdings	Country	Fund %
Sika	Switzerland	6.0
ASML	Netherlands	5.9
Kering	France	5.1
Lonza Group	Switzerland	5.1
Novo Nordisk	Denmark	5.0
Royal Unibrew	Denmark	4.7
DSV	Denmark	4.5
RELX	United Kingdom	3.3
Hexagon	Sweden	3.3
Safran	France	3.1

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

During the month, the Company’s NAV fell by 4.3% and the share price declined by 4.1%. For reference, the FTSE World Europe ex UK Index returned -6.1% during the period.

Europe ex UK markets sold off during the month as surging coronavirus infection rates, as well as the reintroduction of national lockdowns in many European countries weighed on sentiment. While hospitalisation rates rise, we would note that increased hospital capacity and care and a better understanding of the virus have so far led to lower mortality rates than during the first wave. We believe the economic impact of a second lockdown is likely to be more muted this time around.

Many companies are now facing earnings downgrades in Q4 and Q1, but the overall market level is supported by the idea of a vaccine being announced in the near-term, as well as continued recovery in selective end markets going into 2021.

In October, defensive sectors such as telecommunications and utilities held up slightly better, while technology and oil & gas saw the sharpest market falls. The Company outperformed the reference index, driven by strong stock selection while sector allocation was negative.

In sector terms, the Company benefited from being overweight consumer services and industrials. Our higher exposure to technology detracted from returns, although this was more than offset by strong stock selection. While the Company’s higher allocation to healthcare – a sector that often experiences volatility ahead of US elections – detracted, this was also more than offset by accurate stock selection.

Stock selection was strongest within technology, where a new position in Allegro was the top performer over the month. This Polish e-commerce platform selling both international and local brands enjoyed a strong share price performance after only going public in early October. We believe the group’s growth prospects look strong over the medium to long term, as online penetration in the Polish retail market remains relatively low. Within the same sector, Netcompany and ASML were also amongst the strongest contributors.

The industrials sector contributed to relative returns with a holding in Sika being amongst the best performers, beating analyst expectations and raising guidance. The firm has rebounded quickly from considerably negative organic growth in Q2 to being flat in Q3, while also showing strong progression in margins.

French aerospace company Safran also reported strong Q3 numbers towards the end of the month and commentary on improving business trends was taken well by the market. Further, the company’s extensive cost cutting programme is running ahead of expectations. 

Stock selection within healthcare aided returns. Italian DiaSorin performed well given the launch of their COVID antigen test. Additionally, not owning Bayer was beneficial. The company issued a profit warning with the pandemic hitting profits harder than expected, forcing Bayer to write down the value of assets in its agricultural business.

Strong contribution also came from luxury brand Hermes which continued to benefit from the outstanding resilience of the high-end consumer. Within this context, not owning LVMH was negative as the company delivered strong Q3 results.

The Company’s investment in software group SAP was the largest detractor during October. The company published weaker than expected results and cut its revenue and profit forecasts for this year due to depressed business spending as coronavirus cases continue to rise. Importantly, SAP have updated medium term targets, essentially pushing them out by circa two years in part to reflect disruption caused by COVID. We had been expecting the management team to update the strategic targets in light of COVID, however were left surprised by the extent of the revision to forecasts.

A negative contribution also came from RELX which continues to see a COVID impact on their exhibitions business, as well as concerns around lower journals and subscription numbers from universities.

At the end of the period the Company had a higher allocation than the reference index towards technology, consumer services, industrials and health care. The Company had a neutral weighting towards oil & gas and underweight allocation to consumer goods, financials, utilities, basic materials and telecoms.

Outlook

Over recent years, many investors have avoided exposure to European equities owing to concerns around political risk, rising populism and a challenged financial system. We have long been of the view that one needs to take an active approach to investing in European equities. With this in mind, we felt that for active stock pickers Europe as a region can offer shareholders access to some highly attractive companies listed in the region. The response to the fallout from COVID-19 has the potential to change the more negative perception on the asset class as a whole.

The proposed €750 billion EU Recovery Fund is a significant step of solidarity for the bloc and one that can potentially bring greater fiscal coordination. In this context, both the economy and local stock markets appear well positioned to make up lost ground, potentially transforming European equities into a standout opportunity in the developed world, while notably providing further subsidies for growth in Emerging Europe.

16 November 2020

ENDS

Latest information is available by typing www.brgeplc.co.uk 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.