European equities are in vogue among investors as talk about the end of US equity exceptionalism ramps up and focus turns to undervalued European peers. In this light, some of Europe’s most rarified shareholders have turned to monetising crown jewel stocks that are trading close to record highs.

Last week, huge trades in Italian luxury automobile giant Ferrari [BIT:RACE, NASDAQ:RACE] and Swiss pharmaceutical conglomerate Novartis [SWX:NOVN] added billions to European YTD block volumes.

This followed a EUR 1.4bn sell-down in German medical devices company Siemens Healthineers [ETR:SHL] by its parent company earlier in February.

Over the past decade, only 2021 and 2020 have had better starts in terms of European block trades, according to Dealogic data. Deal flow also came from 134 deals in 2021, and 91 in 2020, compared with just 59 European accelerated deals as of March 3 this year. In short, mega deals have dominated this year.

Europe has shown a strong capacity for big block trades in recent years, as exemplified by long sell-down processes in LSEG [LON:LSEG] and Haleon [LON:HLN], but February’s trades are a substantially different beast.

The Ferrari and Novartis trades were both brought by family shareholders with long historic links to the stocks they were selling – the Angelli dynasty in Ferrari, through Exor, and the Sandoz family in Novartis, through Emasan AG, an arm linked to the Sandoz Family Foundation.

Neither trade was expected by the market and were of a significant size.

The Ferrari trade was the first block in the stock and only the second capital markets offering of Ferrari shares since its 2016 IPO. The Sandoz family’s sale in Novartis, meanwhile, was the first accelerated sell-down of its stake in decades.

In both cases, the underlying stocks were trading close to record highs, a sign of the exuberance being shown towards European equities.

Exor CEO John Elkann noted after the deal the huge equity growth had taken Ferrari’s share in Exor’s portfolio to 50% of NAV and that the transaction helped it reduce its concentration and improve diversification. He added that the latter will also be achieved by making a sizeable new acquisition.

To be able to print such huge deals – without any real foreshadowing to the market – shows how much demand there is for European equity.

End of US exceptionalism

Capacity for European blocks has come in juxtaposition with a broader thematic of investment flows into Europe and away from the once dominant US market. Europe’s Stoxx 600 is up 9% YTD, while the S&P 500 is up only 1.46%. The NASDAQ 100 is down 0.43%.

“There is much more interest in Europe, which is seen as very attractively valued versus the US, but it is broader than that,” said an ECM banker involved in last week’s activity. “The recent block trades we have seen are really benefitting from the reversal of the US equity exceptionalism, which has dominated over the last few years.”

As of January 2025, 73.57% of the MSCI World Index was held in US stocks. The two largest European country weights were the UK with 3.49% and France with 2.67%, while the rest of Europe fell into “other” at 12.04%.

“If US pension funds, for example, just wanted to allocate an extra 1% to Europe, then that’s going to take quite a bit of allocation for them to get there,” noted an ECM investor.

The investment flows into Europe have not only pushed reference share prices to such attractive points that sellers want to monetise, but they also mean that there is demand for that monetisation in capital markets.

To speed up this process, several ECM bankers note that these US investors have been taking larger stakes in block trades, which has allowed for a deal rush so far this year.

A second investor noted that he is optimistic about European ECM, but cautious about how long this trend of more flow to Europe might continue.

“There is a growing consensus that US market dominance has peaked, and investors need to redeploy and grow their investment in Europe,” he noted. “We always start the year positively on Europe but certainly this year feels different.”

The investor added that geopolitical noise might be driving some of this shift in allocation, with an unpredictable Trump administration clouding the near-term outlook for many US stocks, and Europe looking increasingly more stable.

A second banker involved in the deals last week agreed that some concern over US political stability might be playing a part in the allocation shift, although he added that structurally, Europe might not be much more stable than the US.

“There are issues with the UK economy and the picture in Germany is far from certain, even after the elections,” he added. “But the marketing around Europe is just so much better at the moment.”

As long as Europe has a good story to sell, there will be hopes that the investment flows, and therefore an opportunity for large sell-downs, will keep coming.