Portfolio Update

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

All information is at 31 March 2024 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)	2.2%	12.7%	20.3%	29.7%	834.9%
Share price	1.4%	12.7%	21.5%	23.4%	797.0%
FTSE World Europe ex UK	3.7%	6.9%	13.8%	31.8%	450.9%

Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only):	671.09p
Net asset value (including income):	673.12p
Share price:	638.00p
Discount to NAV (including income):	5.2%
Net gearing:	10.1%
Net yield1:	1.1%
Total assets (including income):	£675.6m
Ordinary shares in issue2:	100,363,934
Ongoing charges3:	0.98%

1 Based on an interim dividend of 1.75p per share, and a final dividend of 5.00p per share, for the year ended 31 August 2023.

2 Excluding 17,565,004 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 2023.

Sector Analysis Total Assets (%) Industrials 25.2 Consumer Discretionary 22.8 Technology 21.5 Health Care 15.2 Financials 8.6 Basic Materials 5.5 Consumer Staples 1.1 Net Current Assets 0.1 -----  100.0 =====

Country Analysis Total Assets (%) France 22.0 Netherlands 20.2 Switzerland 17.6 Denmark 12.6 United Kingdom 6.4 Sweden 5.7 Ireland 5.3 Italy 3.8 United States 2.8 Belgium 1.8 Germany 1.7 Net Current Assets 0.1 ----- 100.0 =====

Top 10 holdings	Country	Fund %
Novo Nordisk	Denmark	9.0
ASML	Netherlands	7.2
LVMH	France	6.2
RELX	United Kingdom	5.8
Hermès	France	4.2
BE Semiconductor	Netherlands	4.0
Safran	France	3.9
Ferrari	Italy	3.8
ASM International	Netherlands	3.4
Partners Group	Switzerland	3.2

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

During the month, the Company’s net asset value rose by 2.2% and the share price was up by 1.4%. For reference, the FTSE World Europe ex UK Index increased by 3.7% during the period.

Europe ex UK markets were up during March, finishing an exceptionally strong quarter for European equities. Following two months of strong performance of growth assets, value sectors led strong market returns during March. Lower quality cyclicals such as financials and energy delivered impressive performance, while real estate and utilities also rebounded post a tougher period. Technology and the consumer sectors underperformed in the rising market. Stock specific news flow was slightly lighter during the month as the earnings season largely came to an end. Macroeconomic data remained robust. Eurozone and US inflation data continued to head towards central bank targets, whilst economic activity continued to improve.

The Company underperformed its reference index during the month, driven by both sector allocation and stock selection. In sector terms, the Company’s lower weight to the financial sector was negative for returns as particularly the banking sector delivered strong performance during the month. The Company’s higher allocation to technology was the largest detractor from returns as the sector saw somewhat of a reversal after very strong performance in January and February. The portfolio benefited from lower weights in consumer staples and telecommunications.

The technology sector was the largest detractor from relative returns. The sector gave back some of its very strong performance in previous months. Additionally, BE Semiconductor (Besi) was hit by negative newsflow, which led to shares falling close to 15%. Press reports during the month suggested that the adoption of Besi’s hybrid bonding offering may be slower than some had hoped for, specifically in the high bandwidth memory applications. While the short-term uptake of this new technology may be delayed for a short period, we think it is likely that hybrid bonding will play a significant role in high bandwidth memory production in future years and so our medium-term view on the stock is unchanged.

Exposure to the consumer discretionary sector was also negative as particularly the luxury industry was dragged down by Kering’s (not held in the Company) profit warning. Whilst not owning Kering was positive, shares in LVMH stumbled in sympathy despite no fundamental newsflow.

A mixed contribution came from the banking sector during the month. The sector was up on a mix of generally better economic activity, rate expectations holding up better than some had feared and support from share buybacks. Allied Irish Banks was the top contributor during March after reporting strong 2023 results with good revenue visibility. However, not owning BBVA, BNP Paribas and Banco Santander detracted from relative returns.

A number of shares from the industrials sector performed well – for example, IMCD rose on signs that destocking in some end markets is coming to an end. The company reported FY 2023 results in line with expectations, while 2024 consensus estimates seem to be in a good place compared to the updates provided by management.

Positioning within health care continues to be additive with a positive effect from owning Novo Nordisk and Lonza, while avoiding more defensive assets such as Roche and Novartis that continue to lag the market gains. The investment case for Novo Nordisk continues to tick along nicely with news in March supportive of a growing total addressable market for their GLP-1 treatments. The US approved Wegovy for cardiovascular risk reduction in people with obesity, and in doing so, opened the door for Medicare coverage. Late in the month, we saw the first US insurers agree to begin paying for Wegovy through Medicare.

Outlook

We remain fairly constructive on European equities as the set-up should be positive: inflation is on a downwards trajectory and the economy appears relatively robust, Eurozone inflation figures have fallen and, whilst there may be volatility in month-to-month data, the economy can handle these levels of inflation. This also means that we have come to, or are close to, peak rates and at some point, it is fair to assume interest rates will come down. We have already started to see a positive impact on falling mortgage rates in many European countries.

The corporate sector in Europe is healthy. There is limited corporate debt, margins are strong, there is no need for major layoffs and the end of the destocking across most industries is in sight. This in turn is good news for the consumer: a supply chain and energy crisis that is largely done, combined with high employment numbers and falling inflation suggest that the cost-of-living crisis has cooled off. This puts the region in a much better position compared to one year ago.

Nevertheless, the asset class has been under-owned ever since the Russian invasion of Ukraine in February 2022. As always in Europe, it is key to remain selective. Assessing the economy from the bottom-up can uncover areas for greater optimism than traditional economic indicators may suggest. Our regular contact with management teams helps us understand whether the direction of earnings and cashflows on a medium to long-term view for the companies in our portfolio remain on track.

Long-term structural trends and large amounts of fiscal spending via the Recovery fund, Green Deal and the REPowerEU plan in Europe can also drive demand for years to come, for example in areas such as infrastructure, automation, innovation in medicines, the shift to electric vehicles, digitisation or decarbonisation. Valuations are attractive versus history and especially versus US equities. Overall, evidence of a resilient consumer, healthy corporate sector and decent outlooks underpinned by green stimulus, give us confidence that many of the companies in our portfolio can continue to weather the storm.

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.

24 April 2024

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