BGF European Value D2 USD Hedged |
Morningstar's Take
|08/07/2024by Ronald van Genderen
| BlackRock has announced that Stefan Gries will succeed Nigel Bolton as head of its fundamental European equity team on 30 Sept 2022. Bolton joined BlackRock in 2008 and has been leading this team ever since. Bolton came from Scottish Widows Investment Partnership after a period of instability in the BlackRock team and was tasked to reorganize the team. Alongside Bolton came a seven-strong team from SWIP with whom he had worked together for several years. Upon his arrival, Bolton implemented his own approach, which he developed earlier in his career and aligned analyst's responsibilities along sector lines. After these changes, stability was restored although in more recent years, especially over the period from 2017 through 2020, the team has witnessed elevated turnover among its members. Gries was one of the seven members that joined BlackRock alongside Bolton in 2008. He joined SWIP in 2005 as a graduate and after serving several years as an analyst, he got promoted to portfolio manager. This was followed by his appointment to deputy head of the team in 2019. Over the past three years, he has been preparing to take over from Bolton, and we have the impression that the transition has been carefully planned and well-executed with Gries increasingly showing more involvement in the management of the team during the meetings we had in the recent past. This gives us comfort as there will be no major shift in how the team will be managed, structured, and operating going forward. While Gries will become head of the team, he will also retain his responsibilities on the three strategies that he currently manages. While his new role might indicate that his workload will increase, BlackRock has limited the lines that report to Gries. We also point to the fact that the three strategies share quite similar portfolios. Therefore, we think that Gries' workload will remain manageable. The People Pillar rating and the Morningstar Analyst Ratings are left unchanged on all of the funds managed by this team, including the ones managed by Gries, which include BGF European, BGF European Special Situations, BGF European Focus, BSF European Absolute Return, and BlackRock European Absolute Alpha. |
| The combination of a strong and complementary management duo and a high-quality team that supports them in stock selection earns this strategy a People Pillar upgrade to High from Above Average. This team has the capabilities to successfully execute this value-biased approach, which earns an Above Average Process rating. This strategy is managed by Brian Hall, a seasoned and very knowledgeable portfolio manager, and talented comanager Peter Hopkins. They reside in and are supported by BlackRock’s 20-plus fundamental European equity team. This team has gone through a turbulent period from 2017 through 2019, but it has been put back on track, and we consider it now to be one of the best-resourced and highest-quality teams in the space. The increased cohesiveness and diverse talents of its members represent a solid foundation for all the strategies run by the group, which often share the same investment ideas. This high-quality team is key as the managers fully rely on their comprehensive and rigorous research in stock selection. The team’s deep fundamental research, which gained additional data-based insights in 2018, is centered around a structured framework using three lenses: wealth creation, resilience, and change. Ideas are extensively debated within the team, exemplifying the collaborative culture. The team’s stock research drives the managers’ search for stocks that they consider undervalued relative to their fundamentals and are classified across three groups: stable value, cyclical value, and turnaround situations. This is not a traditional value approach as the definition provides leeway to invest in more growthy stocks that trade at attractive valuations. The portfolio typically hovers between the value and core columns of the Morningstar Style Box, unlike the Europe large-value equity Morningstar Category and the Morningstar Developed Markets Europe Value Target Market Exposure Index category benchmark, which squarely land in the value column. The focus is on large caps, but the managers can take advantage of opportunities down the market-cap ladder as well. This leads to a small tilt toward mid- and small caps relative to the category benchmark, but it remains well in line with peers. The approach is implemented with conviction by the managers, as reflected by the portfolio’s above-average top-10 concentration and their willingness to let bottom-up stock selection drive sector allocations. For example, the industrials sector has been always overweight, but the managers have significantly added to their allocation in recent years. Hall has achieved a commendable track record. The strategy has substantially distanced the category average and benchmark over his tenure. Risks have been held in check, hence risk-adjusted performance has been outstanding and largely achieved by strong stock-selection results. |
A strong management duo backed by a high-quality team earns our highest grade.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | High |
| Parent | Above Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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