BLACKROCK EUROPEAN DYNAMIC FD GBP HGD

Investment Process

The investment universe for the fund is large and mid-cap European equities, though some UK and US stocks may also feature in the portfolio. The typical minimum market capitalisation is around £1billion with over three-quarters of holdings valued over £10billion. The targeted stocks are put into four broad sectors – Consumer, Financial, Healthcare, and Industrial – which are each covered by a “research pod” led by a senior fund manager/analyst on BlackRock’s European equity team. Investment ideas are sourced from screens looking at valuation metrics and earnings momentum, from sector analysts, company meetings and after considering factor and thematic trends. The analyst team then carries out fundamental research on each stock. The research is predominantly bottom-up and focuses on whether the company can create wealth for its shareholders, is resilient through economic cycles and whether it can evolve to drive future earnings and cashflow. The team also looks at economic factors, including analysis of consumer footfall or credit card spending from BlackRock’s data team. They also consider structural changes in the global economy such as technological disruption. ESG is also embedded in the process, looking at issues including carbon emissions and labour standards. Each stock is given a rating from 1-5 based on risk-adjusted conviction and the target price, calculated on a 12-month time horizon - 1 (strong buy), 2 (buy), 3 (hold/neutral), 4 (negative) and 5 (very negative). Portfolio managers then have to determine whether recommended stocks are suitable for their portfolios. Rothbarth typically uses 1 and 2 rated stocks, though he occasionally buys 3-rated stocks on positive news rather than wait for the analyst to change the rating.