BlackRock Greater Europe (BRGE) is to ramp up dividends, change its name and cut costs as the £488m investment trust strives to pull out of a five-year slump with the help of Benjamin Moore, the lead fund manager appointed earlier this year.

The company will also offer a 25% exit in five years’ time with investors able to tender up to a quarter of the trust’s shares at a 2% discount to net asset value (NAV) if performance does not beat the total return of the FTSE World Europe ex-UK index in the 60 months to 31 August 2031.

The announcements came in annual results showing another period of underperformance by the growth fund with a total 8.8% investment return in the year to 31 August that fell behind the 20.9% advance in the benchmark. 

Chair Andrew Impey said it was a “disappointing” result that left the portfolio up just 0.5% over five years compared to the index return of 59.1%. Over 10 years, it has generated 156.3% versus the benchmark’s 173.4%.

However, Impey said the second half of the financial year had seen the trust outperform the index by 4% under Moore, who in March replaced Stefan Gries, the former fund manager who left BlackRock for health reasons after working “tirelessly”. 

Acknowledging it was too early to claim a turnaround, Impey pointed to the changes that Moore, who previously ran Columbia Threadneedle’s CT European fund, had made with co-manager Brian Hall, who was appointed a year ago.

The pair said they had broadened the portfolio, adding to industrial exposure through the additions of aerospace companies Airbus and Leonardo and data centre infrastructure providers Legrand and ABB Group, increasing holdings in semiconductor equipment companies ASML and ASM International, and cutting firms facing potential disruption from artificial intelligence. 

New name, bigger dividends

At the top of a series of changes to increase BRGE’s appeal is an enhanced dividend policy under which the trust will distribute 4.5% of net assets each year through payments that will be quarterly rather than semi annual. BRGE currently yields 1.3% and its shares stand on an 8.5% discount to the value of the portfolio. 

To underline the pitch to income investors, BRGE’s name will change to BlackRock European Growth & Dividend Trust. 

Peel Hunt analysts were positive on the dividend increase. “It looks like the 4.5% NAV-based dividend is the lever most likely to impact the share price rating, in our view – it pairs a quarterly income story with the only “dividend hero” status in the AIC Europe peer group.” they said.

“Dividend hero” is a term coined by the Association of Investment Companies for trusts that have consistently raised annual dividends for over 20 years.

BlackRock has also agreed to cut its management fee, trimming the tiered rates on net assets up to £1bn by 0.05%. This should reduce annual ongoing charges from 0.95% to 0.75%, which is more in line with its three rivals in the AIC Europe sector.

Lastly, the trust will be more “strategic” in its use of gearing, or borrowing to boost long-term returns. Although a 0%-15% gearing range will remain unchanged, it will target a baseline of around 10% borrowing in markets where earnings are growing. It will also use derivatives, or total return swaps, as a cheaper alternative to a traditional credit facility.

Impey said: “Having taken steps earlier in the year to improve performance by refining our investment approach, the board has subsequently undertaken a comprehensive review of the company’s use of the advantages offered by the investment trust structure. The board is introducing these initiatives with the objective of enhancing shareholder returns, improving marketability and strengthening the long-term investment proposition.”

Our view

QuotedData senior analyst Richard Williams said: “These results extend a difficult period for BRGE’s quality-growth approach, with underperformance over three and five years particularly pronounced. The board’s package of strategic initiatives is a welcome, if overdue, response. Most striking is the introduction of a 4.5% NAV-based dividend policy, which implies an annual payout of approximately 29p per share, more than three-and-a-half times the 8p paid for 2026. This represents a significant repositioning towards income-seeking investors, although much of the enhanced distribution will be funded from capital rather than underlying earnings. Lower management fees and a new performance-linked tender offer should also strengthen the shareholder proposition, although the latter will only be triggered in 2031 if underperformance persists. Encouragingly, new lead manager Benjamin Moore has broadened the investment approach, placing greater emphasis on valuations and opportunities beyond traditional quality-growth companies. These changes are welcome, but a sustained improvement in investment performance will be crucial to securing a stronger rating for BRGE’s shares and reducing the need for buybacks.”