The management and board of the BlackRock Greater Europe investment trust (BRGE) are in "live discussions" about investing in unlisted stocks for the first time, according to manager Stefan Gries.
BRGE can currently invest up to 5% of its portfolio in private companies, but has not historically taken advantage of that flexibility yet.
However, Gries told Investment Week "the opportunity looks reasonably good right now".
Gries added he has been speaking with the board about the possibility, "but we need to make sure that all the stakeholders are on board and happy with it".
"We are in a really strong position," Gries continued. "Because we sit within BlackRock, there are lots of private companies coming through, and there are other [BlackRock] funds investing in European private companies.
"We are just trying to find the right set-up, and making sure that everyone's happy when we do it. And if we did it, it will be in a very carefully managed way, minimising those risks.
"You would go for a company that is maybe pre-IPO, already or close to breakeven, or profitable, and also larger in size."
The addition of private companies would add an extra layer of differentiation from sector peers, Gries said.
The trust already uses research from Sam Vecht's emerging Europe team. The emerging Europe portion of the fund can be as high as 25%, but "in reality it typically is in the range of 5% to 15%".
After profits were taken from Sberbank earlier in the year, the emerging Europe weighting currently accounts for 5.8% of the trust and comprises Israeli duo Israel Chemicals and telecoms provider Bezeq, Poland's Bank Pekao and Greece's Alpha Bank.
Gries has "a strong negative view" on banks in developed Europe due to numerous pressures on their margins and, therefore, profitability.
Having the latter two, then, "gives access to opportunities we cannot find in developed Europe".
Gries also co-manages the long/short BlackRock European Absolute Return fund, which gives the trust a different view: "The [trust's sector] underweights are not just areas that we do not like; very often we have built compelling short cases in those parts of the market. Europe is full of really quite average-to-poor companies."
One example is the steel industry, within which the absolute return fund shorts a number of stocks.
"European steel producers are price takers [and] have no control over their raw materials. As a result, if you look at their returns over a cycle, they very often do not cover their cost of capital," Gries said.
Gries' most significant portfolio change has been in the trust's technology weighting, which has almost doubled from 9.3% as at 31 August 2018 to 17.3% 11 months later.
That has come in the form of new positions in airline ticketing provider Amadeus IT Group and precision measuring technologies provider Hexagon, which accounted for 3% and 2.8% of the portfolio as at 30 June
The trust's position in chip-maker ASML has increased from 2.8% in August 2018 to 4.1% in August 2019; software provider SAP has increased from 4.6% to 5.9%.