Quality growth strategy: BlackRock Greater Europe

BRGE’s quality growth strategy takes a more disciplined approach to valuation…by Alan Ray

Overview

BlackRock Greater Europe (BRGE) owns a concentrated portfolio of European companies designed to generate capital growth. At its heart, this is a quality growth portfolio focused on larger cap companies, but with the flexibility to invest across the market-cap spectrum and, recently, a more valuation-aware element has been added to the investment approach.

BRGE’s Performance has trailed the benchmark over five years, with an NAV total return of 9.6% compared to the FTSE World Europe ex UK’s 51.4%. The overarching reasons for this are related to sector and style, with value stocks, and sectors that BRGE is typically underweight such as financials, energy and utilities, performing well, in contrast to some of the sectors more associated with BRGE, such as the consumer discretionary luxury brands, technology and healthcare, where a much more mixed picture has developed.

Whereas BRGE’s core proposition as a quality growth investor is unchanged, the trust has seen some changes to management since November 2025. First, experienced investor Brian Hall joined the team as co-manager, bringing a more value-conscious approach. Second, more recently it was announced that long-term manager Stefan Gries had left BlackRock and his colleague Benjamin Moore would take over his role. Benjamin’s track record is also in quality growth investing, but similarly to Brian, he pays close attention to valuations.

BRGE’s board has also agreed a reduction in management fees, with the ongoing charges figure estimated to reduce from 0.95% to 0.78%, bringing it more into line with the Morningstar Europe peer group. BRGE’s discount is 7% and the board has made steady use of share buybacks to maintain a single-digit discount. Although BRGE’s yield, 1.3%, is relatively low, it has increased every year for twenty years and BRGE is one of the AIC’s dividend heroes.

Analyst’s View

Europe’s stock market renaissance has been driven by lower valuations, banks and other domestic-focused areas, with boosts from anticipated rises in spending by Germany in particular. BRGE’s growth-orientated strategy, successful for a long time, has had a harder time in this higher interest rate phase of the market and it has lagged the benchmark significantly, after a long period where its growth strategy proved very successful.

The hypothetical mirror of perfect hindsight shows that, given the circumstances, this outcome isn’t that surprising. The renaissance came at a moment when, first, investors were looking for alternatives to the high valuations in the US equity market and, second, when Europe’s largest economy was starting the engine on a big infrastructure and defence spending programme. So, it’s not that surprising that investors turning away from high valuations in the US were drawn to the ‘value’ rather than ‘growth’ opportunity in Europe. But ultimately, what has just happened is a recovery phase and the real case for investing in Europe, which over the long term can’t be relied upon to provide the same economic growth engine as the US or China, is in the success of its individual companies. This is where BRGE’s strength lies: in selecting the best long-term growth companies that can perform well even when Europe’s economic backdrop is less constructive. Thus our view, ‘sticking to its knitting’ of investing in quality growth companies and introducing a little more discipline on the valuation side, is the right long-term decision for BRGE, and when the market’s pendulum swings back to long-term growth prospects, BRGE will be very well-positioned to capture the upside.

Bull

• A high-conviction portfolio of some of Europe’s best growth companies
• Revised fee structure reduces OCF significantly
• A rigorous and comprehensive approach to managing the discount

Bear

• BRGE has a relatively low yield, albeit with a twenty-year track record of increasing the dividend
• Some European economises are vulnerable if recent energy price rises persist
• BRGE uses gearing, which can amplify losses as well as gains

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_{This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}