Morningstar

BGF European Special Situations E2 (USD)

Analyst Report
Morningstar's Take
|08/07/2024
by Ronald van Genderen
BlackRock announced that Tom Joy has been appointed co-portfolio manager alongside Stefan Gries on BGF European Special Situations, effective April 16, 2025.

Joy joined BlackRock early in his career and gradually took on more responsibility, first as an analyst and then as a co-portfolio manager on BGF Euro-Markets, working closely with Andreas Zoellinger. He became the sole lead manager of this strategy in early 2025, following Zoellinger's retirement. In November 2024, Joy became comanager of BGF European Equity Transition alongside Peter Hopkins, but he’s relinquishing this responsibility following his appointment to BGF European Special Situations.

We view Joy's appointment alongside the highly regarded Gries as a strengthening of this Strategy's leadership. However, BlackRock also announced the unexpected departure of Stephanie Bothwell from the team, which comes on the heels of team changes earlier in 2025, including the loss of some research analysts. Despite the organizational shifts, we reiterate the strategy's People Pillar rating of High and the Process Pillar rating of Above Average, but we will conduct a full assessment of the impact of recent events in due course.

 
The combination of a capable and very knowledgeable lead manager and a high-quality team that supports him in stock selection earns this strategy a People Pillar upgrade to High from Above Average. This team has the capabilities to successfully execute this flexible and unconstrained approach, which earns an Above Average Process rating.

This strategy is managed by Stefan Gries, a capable and very knowledgeable portfolio manager. He resides in and is 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 Gries fully relies on its comprehensive and rigorous research in his 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 Gries’ search for companies that score well on quality of management, investment in growth, return on capital, and unique aspects. The approach is flexible in style, but we expect its investment criteria to result in a structural growth orientation in stock selection, although there is room for more opportunistic value plays as well.

The portfolio typically lands in the growth columns of the Morningstar Style Box driven by for example longer-term top-10 holdings Novo Nordisk, ASML, and LVMH. Gries can invest across the market-cap range but typically focuses on large caps, with small caps playing a minor role, aligning the portfolio size exposure with the Europe large-cap growth equity Morningstar Category average and Morningstar Developed Markets Europe Growth Target Market Exposure Index category benchmark. The approach is implemented with conviction, as reflected by the portfolio’s high top-10 concentration and Gries’s willingness to make bold moves, translating into dynamic sector allocations. For example, he has built out his positioning in the financial services sector since 2022, mostly by adding to his positioning in banks, and the sector has been significantly overweighted versus the category average and benchmark ever since.

Gries’ record is still limited, but he has a longer remit on BGF European, which uses the same approach. Here he is building a convincing track record since he took charge of it in June 2019 and has significantly distanced the category average and benchmark over his tenure. Risk levels have been elevated, but his risk-adjusted performance has been outstanding and largely achieved by strong stock-selection results.
 
Morningstar Medalist Rating™A capable manager backed by a high-quality team earns our highest grade.
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Morningstar Pillars
PeopleHigh
ParentAbove Average
ProcessAbove 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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