Portfolio Update

The information contained in this release was correct as at 30 September 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 30 September 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)	2.9%	8.7%	20.6%	43.8%	530.1%
Net asset value* (diluted)	2.9%	8.7%	20.5%	43.7%	530.4%
Share price	1.2%	7.2%	20.0%	44.8%	507.5%
FTSE World Europe ex UK	0.7%	1.4%	0.4%	8.9%	273.7%

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

At month end

Net asset value (capital only):	469.24p
Net asset value (including income):	474.24p
Net asset value (capital only)1:	469.24p
Net asset value (including income)1:	474.24p
Share price:	452.50p
Discount to NAV (including income):	4.6%
Discount to NAV (including income)1:	4.6%
Net gearing:	7.5%
Net yield2:	1.3%
Total assets (including income):	399.9m
Ordinary shares in issue3:	84,323,101
Ongoing charges4:	1.1%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.10p per share for the year ended 31 August 2020 and an interim dividend of 1.75p per share for the year ending 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 2019.

Sector Analysis Total Assets (%) Technology 24.0 Industrials 20.7 Health Care 17.8 Consumer Goods 11.0 Consumer Services 9.5 Financials 8.1 Basic Materials 3.9 Oil & Gas 3.5 Telecommunications 1.7 Net Current Liabilities -0.2 ------- 100.0 ====

Country Analysis Total Assets (%) Denmark 19.9 Switzerland 15.1 France 12.7 Netherlands 12.2 Germany 9.5 Sweden 5.7 Italy 5.7 United Kingdom 3.9 Russia 2.8 Israel 2.7 Spain 2.5 Finland 2.3 Ireland 2.3 Belgium 2.0 Poland 0.7 Greece 0.2 Net Current Liabilities -0.2 ------- 100.0 ====

Top 10 holdings	Country	Fund %
Sika	Switzerland	6.1
ASML	Netherlands	5.8
Kering	France	5.5
Novo Nordisk	Denmark	5.3
SAP	Germany	5.2
Lonza Group	Switzerland	5.2
Royal Unibrew	Denmark	4.9
DSV	Denmark	4.7
RELX	United Kingdom	3.9
Hexagon	Sweden	3.6

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

During the month, the Company’s NAV rose by 2.9% and the share price by 1.2%. For reference, the FTSE World Europe ex UK Index returned 0.7% during the period.

Europe ex UK markets were slightly up during September despite renewed fears of a second wave of COVID-19, with evidence of rising case numbers in many European countries.  However, importantly, the number of hospital admissions has not risen significantly. While most governments looked to take some action, new restrictions have been much lighter and we do not see another full lockdown to the extent we saw in March and April of this year. The overall impact on the economy should therefore be much lower than it was during the first wave.

Consumer stocks and healthcare held up strongly, while the oil & gas and financials sectors fell during the month. The Company outperformed the reference index, driven by strong stock selection, while sector allocation was also positive. In sector terms, the Company benefited from a lower allocation to financials. The sector fell as investors became increasingly concerned over a slower recovery and therefore slower economic growth. The Company’s higher allocation to consumer services and industrials was also positive. An overweight allocation to technology detracted, although this was more than offset by strong stock selection.

A number of consumer stocks were amongst the best performers, as consumers’ propensity to spend continued unabated despite concerns around the pandemic. Kering was the strongest contributor to returns. Consumer data remained robust during the month and the Gucci-owner benefited from an improving outlook in the luxury environment ahead of Q3 results, particularly driven by demand in the U.S. and continued strength in Chinese spend. Adidas also performed well, experiencing strong demand for sportwear and athleisure and seeing tailwinds from the better-than-expected results of peers such as JD Sports and Nike.

Stock selection within industrials also aided returns as DSV continued to perform strongly. Chemicals distributor IMCD also aided returns as the company raised equity to fund the acquisition of Indian pharma ingredient distributor Signet, a deal that was taken positively by the market. To us, this looks like a strategically attractive deal which will enable IMCD to increase their presence in the pharma market and expand their geographical reach. Elsewhere in industrials, positions in Sika and Kingspan were also amongst the largest contributors.

Within the technology sector, a positive contribution came from industrial and software conglomerate Hexagon, who specialise in the provision of geo-mapping and monitoring software and sensors, as well as plant management and automation systems. Management feedback remains encouraging as the company continues to see strength across the board in China, as well as a speedy recovery in the North American market.

On the negative side, we mainly saw travel-related stocks falling during the month. Concerns over case numbers picking up, renewed restrictions, as well as weakness in air traffic, had a negative impact on travel-related stocks. Airlines (none held in the portfolio) have started to downgrade expectations as winter holiday bookings are subdued so far. This had an adverse impact on our holding in engine manufacturer Safran which was the largest detractor during the month. Negative contribution also came from Russian energy company Lukoil which fell in line with the oil and gas sector.

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 an 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, a challenged financial system and the region’s larger than average exposure to China. 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 did not need to be positive on Europe as a region to offer our shareholders exposure to some highly attractive companies that happened to be 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 (the Fund) is a great step of solidarity for the bloc and one that can potentially bring greater fiscal coordination. This Fund, made up of €390 billion of grants and €360 billion of loans, could create net transfers ranging from 3% to 20% of GDP for countries such as Greece, Portugal, Spain and Italy. To be funded from issuance of common EU bonds, this Fund marks the first instance of debt mutualisation for the region – a step which will act to bring in yield spreads for those southern economies and potentially reduce the ever-looming risk associated with a break-up of the bloc. We believe this can bring down the overall risk premium for European equities.

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.

15 October 2020

ENDS

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