Why investors are turning to European equities

After years of outflows from active European equity strategies, driven partly by relative underperformance and the powerful pull of US mega-cap technology stocks, investor interest in the region is beginning to recover. Several factors support the case for reconsidering Europe.

European equities continue to trade at clearly more attractive valuations relative to their US counterparts, with an average discount across valuation measures of more than 40%, ¹ as illustrated by a forward P/E of 14.8x in Europe versus 21.7x in the US. At the same time, Europe offers a more balanced sector profile across financials (23.71%), industrials (19.32%), and healthcare (12.9%), with no single sector dominating the index, unlike the US where information technology alone accounts for 38.33%. ²

Europe is also far less concentrated in single names: its ten largest constituents make up just 20.6% of the index, versus 38.4% in the US. Many large European companies generate a substantial share of their revenues outside Europe,³ giving investors exposure to global business models rather than a purely domestic regional story. Thus, for investors seeking to rebalance portfolios, reduce reliance on a narrow group of mega-cap stocks, and broaden regional exposure, European equities can play a valuable role.

History shows that leadership between the US and Europe has alternated over time. The recent outperformance of European equities may therefore be an early sign that investors are beginning to reassess a long-neglected market.

Capturing the European equity opportunity is not simply a matter of making a broad regional allocation. Europe is a diverse market, spanning many countries, currencies, sectors and business models: fertile ground for active investors, but complex.

This makes a systematic approach highly suitable for the European landscape. Rather than relying on a single market view or a binary call on regional rotation, a quantitative process can evaluate a broad universe of stocks consistently, using multiple return drivers such as value, quality, momentum, analyst revisions and short-term signals, identifying attractive opportunities across the market while reducing reliance on any one factor, sector or style.

At the same time, a benchmark-aware framework helps control unintended risks, manage concentration, and keep the portfolio aligned with the role European equities are expected to play in a broader allocation. Robeco’s 3D European Equity ETF is designed to capture this opportunity through a disciplined ‘3D’ enhanced indexing approach, combining broad European equity exposure with a systematic framework that dynamically balances three dimensions of investing: return, risk and sustainability.

European equities offer a compelling opportunity for investors seeking broader diversification, attractive valuations and exposure beyond US technology dominance. But the region’s diversity also calls for a disciplined approach to stock selection, risk management and portfolio construction. Robeco’s 3D European Equity ETF is designed to meet this need, offering investors a research-driven, benchmark-aware and efficient way to participate in Europe’s evolving opportunity set.

Footnotes

¹ Average discount based on P/E, forward P/E, P/B and 1/DY.
² Source: MSCI, Robeco. Data as of 29 May 2026. Average discount based on P/E, forward P/E, price-to-book and inverse dividend yield for MSCI Europe versus MSCI USA.
³ See Robeco article ‘Old world, new money’