(Bloomberg) -- BlackRock Inc.’s Rick Rieder is investing more in European equities as he expects the region’s industries to benefit from an increase in fiscal spending.

The portfolio manager is increasing exposure to European banks, defense and technology companies in funds including the $15.8 billion BlackRock Global Allocation Fund, Rieder said in an interview in Zurich. The fund returned 9.2% last year and was slightly underweight European shares against the benchmark at the end of February, according to public filings.

BlackRock is adjusting its exposure to European assets after Berlin and Brussels announced plans to borrow hundreds of billions of euros for defense and infrastructure spending. The money manager turned negative on euro-area government bonds earlier this week, and the shift in its stock allocations comes amid a surge in the region’s equity markets, driven by the spending plans.

“It was a pretty clear trade for the last couple of years to do lending in Europe and to buy equities in the US,” said Rieder, BlackRock’s chief investment officer of global fixed income and head of the global allocation investment team. “But I think that balance has changed.”

European shares have been rallying so far this year, with banks rising over 20% year to date, making the sector the best performer in the benchmark.

Explaining the appeal of European banks, Rieder said private lenders will have a big role to play financing the looming spending rush. He had UniCredit SpA and Intesa Sanpaolo SpA among the fund’s holdings, according to public filings from Dec. 31.

“European banks are a very attractive investments today because of their ability to do additional financing,” Rieder said. “Valuations still aren’t that high.”

Europe’s push to borrow comes in response to US threats to scale back its military support for the region. The market capitalization of a basket of European defense stocks tracked by Goldman Sachs Group Inc. has increased by $125 billion from the start of this year.

(Updates with fund performance in second paragraph.)