Beware of the free lunches on offer

There are some massive discounts around these days and nowhere more so than in the property sector. But as ever, there's a health warning. These big discounts may not be quite the free lunch they seem.  

The economic downturn means there are some massive discounts around these days and not just on the high street. Plenty of big bargains are on offer in the investment-trust world, too. Some of the discounts to net asset value (NAV) the gap between the share price and the underlying book value of the portfolio have hit traffic-stopping proportions. Nowhere is this more apparent than in the property sector.

For example, the Invista European Real Estate fund now trades at a discount of around 67%. That's like buying £3 of assets for £1. In fact, for the European direct property sector as a whole, you can pick up £2.50 of NAV value for £1, according to data from Wins Research. And the British direct property sector is in more or less the same boat, selling on an average 43% discount to published net worth, even though the latter has dropped by 11% over the last six months. "The current discounts in property are a buying opportunity", says fund manager Daniel Lockyer of the iimia Investment Trust.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.