HEAD-TO-HEAD: Blackrock versus Invesco

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Investment approach

Both funds aim to generate income together with long-term capital growth, through investing primarily in European (including UK) equities which are likely to pay attractive dividends.

Yet, there is a considerable difference in the size of the two funds, with $1.69bn of AUM held by the Blackrock product, and only $72m in the Invesco fund.

They also have different approaches to achieving their objectives.

“Although there is an element of value investing in both funds, there is stronger emphasis on this style in the Invesco fund, which has pharmaceutical firms Sanofi, Roche and Novartis among its top three holdings,” said McDermott.

Despite the prominent position of the pharma names in its portfolio, the fund is underweight healthcare stocks (10.9%) compared with its benchmark MSCI Europe index (14.6%), according to its most recent factsheet.

Instead, the Invesco fund has an overweight to financials (20.4% versus 17.6% for the index), a sector that typically pays higher, and more reliable dividends.

Its biggest country exposure is to France (21.7%) and the UK (25%), and it has core holdings in Germany and the Netherlands, but is significantly underweight Switzerland (8.4% versus 15.6% for the index.

Although the fund is well-diversified, the co-managers James Goldstone and Oliver Collins, are quite rigid in their value-style, according to McDermott, which has affected he fund’s performance during years when growth-style investing has been in vogue and has delivered superior returns.

In contrast, “the Blackrock fund’s manager, Andreas Zoellinger, has a more pragmatic style and a tilt towards quality businesses that should out-perform in difficult markets,” said McDermott.

“Research is central to Zoellinger’s investment process and a key source of added value for the fund,” he added.

Like the Invesco fund, the Blackrock fund has large-cap bias – comprising around three-quarters of the holdings in each portfolio – but Zoellinger “is particularly focused on fundamental company analysis, with a strong awareness of macroeconomic trends,” said McDermott.

The fund’s largest country exposures are France (27.9%), the UK (17.3%) and Switzerland (15.2%), according to the most recent factsheet.

Sector overweights include financials (22.8%), industrials (19.5%), utilities (15.6%) and communication services (9.9%), and the fund is underweight healthcare (9.1%), consumer staples (5.9%) and materials (3.2%).

The Blackrock fund is focused on fundamental company analysis, with a strong awareness of macroeconomic trends, according to McDermott.

“He steers away from the benchmark when necessary to better protect total returns and ensure a superior yield,” he said.

“Zoellinger actively manages the portfolio to find a balance of companies with large, but secure dividends, and those that are able to grow dividends faster than the average company,” he added.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 20 March 2020)

Fund characteristics

Country allocation:

Source: Fund factsheets, 29 February 2020

Sector allocation:

Source: Fund factsheets, 29 February 2020

Top 10 holdings:

Source: Fund factsheets, 29 February 2020

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