It’s sometimes tough being an equity investor in Europe, particularly one who likes to play in ECM. IPOs are few and far between and the ones that do come to market often leave you poorer than you were before the deal.

Block trades though have performed better, but selectivity was key to success this year. Only a few deals offered the sort of benchmark-beating performance that moves the needle for fund managers.

Follow-ons (excluding rights) generated returns of -0.56% year to date (YTD), confirming the views of an investor speaking to this news service that block trades gains were not, in general, holding up in the long term. But there is an argument that blocks are essentially a short duration product for many investors.

A second investor said that block trades have largely worked for his firm this year, provided he held trades for a relatively short period to generate alpha.

Blocks have also been a good prospect for more fundamental investors building positions in large-cap stocks they like, especially in the absence of IPOs, noted a long-only buysider. Short-term performance is less of an issue for large institutional funds who often hold onto stocks with a ten year horizon in mind.

Some of Europe’s best short-term performers have continued to generate big returns for investors, like a January trade in Sweden’s Hemnet [STO:HEM] have gone on to generate large returns for those who took part. Others though, have been less lucrative in the long-term.

Over one month, block trades overall did generate some gains for investors with weighted performance of around 3% over a month, which is far from disastrous given the main European benchmark has only gained 8.62% over the whole year.

The best performing asset class YTD for European ECM has been rights issues. Investors, keen to back companies with compelling equity stories with primary capital, have been largely rewarded for their faith with weighted gains of around 26.4% YTD, massively outperforming not only every other ECM asset class in Europe but also the Stoxx 600.

With several large primary raises predicted for 2024, continuing strong performance in the aftermarket will encourage more investors to get involved in rights issues, be they existing shareholders or not.

A huge wall of pandemic-era debt-maturities is set to hit next year, so support from equity investors could prove vital. One such company is France’s Alstom [EPA:ALSTOM], which has publicly said it is considering an equity capital raise following a profit warning in the autumn.

The biggest disappointment for European ECM has been the IPO market, which has substantially underperformed this year.

Weighted YTD performance for IPOs is -1.8%, which might not seem too bad on first appearance, but much of the gains in the market this year came from the IPO of Romania’s Hidroelectrica [BUC:H2O], bought largely by local and regional pension funds.

Outside of Hidroelectrica, Germany’s Schott Pharma [ETR:1SXP] and Sweden’s Rusta [STO:RUSTA] have given investors decent performance in what has otherwise been a hard IPO year.

If Hidroelectrica were excluded, Europe’s weighted YTD IPO performance would be around -13%, a poor year for the continent’s premium equity capital market.

While many investors are sitting on disappointing losses, those who backed the right follow-ons, and perhaps held their nerve for just the right amount of time, may be clinking champagne glasses as they celebrate the festive season.