Fund in focus - Funds - The Share Centre

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Fund in focus

Each week, our analysts put the spotlight on a fund from our Platinum 120 range of quality funds, which they believe has strong management and performance prospects for the medium/long term (generally 3+ years). Each fund is given a risk rating and is classified by IMA Sector to give you a broad idea of its objectives or underlying assets. This week's Fund in focus is...

BlackRock Continental European Income D Fund Inc


  Fund IMA Sector Current
price (pence)
Our risk rating Add to watchlist?
 Blackrock Continental Euro Incom... IA Europe Excluding UK 149.8000  M6 Watch
Recommended at p on 17 March 2017

Find out more about this fund.

Our view

Europe

While company balance sheets in the Euro-zone remain strong, policy reform is painfully slow and Euro-sceptic parties are gaining ground in elections with which Germany, France, the Netherlands and potentially Italy will all be battling in 2017. These elections will make agreement on reforms and more specifically implementation of them overtly challenging.

European Central Bank (ECB) action and a strong dollar should favor Euro-based companies, which are supported by a weaker currency. Valuations look appealing but given the political backdrop drip-feeding for now might be the best way to iron out the volatility ahead.

European sovereign bond yields rising as a consequence of the FED rate rise(s), could put further pressure on the ECB, which is fighting deflation and low growth to support additional easing through expanded asset purchases.



Fund positioning

The fund currently has a sectorial bias towards financials, telecoms and industrials, which tend to be economically sensitive areas of economies. Andreas Zoellinger, the fund's manager, favors exposure to the Netherlands, France, Switzerland and Germany, which is a reflection of the positions held in individual companies in those regions.



About the fund

The BlackRock Continental European Income fund, co-managed by Alice Gaskell and Andreas Zoellinger.

The underlying portfolio construction is comprised of two key elements. Around 60% of the portfolio is invested in above average dividend yield paying companies where the potential for a dividend increase is less likely. The remaining 40% of the portfolio is generally invested in companies that have a slightly lower level than the average, but that have the potential to grow the dividend over time.

The fund is reasonably concentrated with the number of around 40 stocks, spread across small, mid and large capitalized companies, albeit with a medium to large cap bias and seeking those that have low levels of debt/borrowings within them.



Observations

The fund was launched in May 2011 and since that time; Alice and Andreas have built up an impressive track record and an average higher yield premium relative to the index. . This fund may be suitable for those income investors that are seeking some overseas income diversification in a region that at present looks good value.

Investing in Europe should also provide a large pool of investment choice for the fund manager to achieve the goals of the investment portfolio. It's a region that has more companies paying dividends than the UK offers and is one of the highest-yielding across all the developed markets.



This fund has a position in the SF Positive and SF Adventurous portfolios.



Comment last reviewed February 2017

Author: Sheridan Admans, Investment Research Manager

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