BlackRock to list megafund on JSE
Locals to get a taste of European blue chips, with PSG Capital acting as sole bookrunner
BlackRock, the world’s largest asset manager, plans a secondary listing of a megafund on the JSE in November, which would give local investors a taste of European blue chips Unilever, Volvo, Renault and Bayer without going offshore.
The BlackRock Greater Europe (BRGE) Investment Trust, which is listed on the London Stock Exchange and has assets worth £313m (about R5.6bn), will first be offered to qualifying investors through a private placement. PSG Capital is acting as corporate adviser and sole bookrunner for the proposed listing.
“We are aiming to raise an initial amount of approximately R650m,” said Simon White, BlackRock’s MD for closed-end funds. “However, it may be more.” A number of big names had shown “good interest” in the listing, he said.
Stefan Gries, the trust’s joint-portfolio manager, has had a number of positive exploratory meetings with potential investors in SA, according to chairman Eric Sanderson. “Any issue of shares would fall within the existing authorities granted by shareholders at last year’s annual general meeting,” said the chairman.
Shareholders gave directors the power to allot up to 10,200,311 shares in the trust.
White said the trust was different from an exchange-traded fund (ETF).
“ETFs typically replicate a specific index,” said White. “BRGE on the other hand is an actively managed investment trust or closed-end fund, which will give South African investors exposure to the best ideas, European growth companies in a concentrated portfolio managed by BlackRock.”
The fund, established in 2004, is managed by 20-strong team of portfolio managers and sector analysts covering Europe. It has mostly invested in companies that are based in Switzerland, France, Denmark and Germany.
The IMF has revised growth projections for European countries using the euro currency upwards for 2017 as electoral uncertainty diminished. The IMF is now projecting growth in the area at 1.9% and 1.7% for 2017 and 2018, respectively, an increase of 0.2 and 0.1 percentage points from previous estimates.
SA is expected to grow 1% and 1.2% during those years.
White said BlackRock had been building its business in SA since 2012 and wanted to raise its profile in the market further.
Simon Brown, an analyst and founder of investment education platform JustOneLap, welcomed the mooted listing, which he said would present more choice for investors. “Returns have been decent, beating benchmark.”
The BlackRock Greater Europe Investment Trust’s growth in net asset value over one, three and five years has outpaced that of the benchmark FTSE World Europe ex UK Index, although the trust admitted it had fallen behind the benchmark during the financial year to August 2017.
“Notwithstanding that returns were positive, the company lagged behind the reference index in this period, principally due to sector allocation and stock selection,” said Sanderson on the release of its results on Monday.
The trust had a higher allocation to the consumer services sector, which underperformed the market.
A lower allocation to the financials sector – which delivered strong performance as investors piled into banking shares on the expectation of higher interest rates — proved to be a bad call.
“Generally, I am wary of active managers,” said Brown.
“The trend is they charge a lot to underperform an ETF,” he explained.
The BlackRock trust charges 0.85% of net asset value as an annual management fee, according to its latest published fact sheet. Brown said this was not a lot for a company offering offshore exposure.
“The Sygnia Itrix FTSE 100 ETF “is 0.75% including VAT if I recall correctly”, said Brown.
“So if it is cheap, it makes for a nice easy way to get Europe exposure and it is different to the [Sygnia] EU ETF, which is dominated by France and Germany.
“A JSE listing will incur extra costs — if nothing else currency conversion from British pound to rand.”