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Alan Brierley, analyst at Collins Stewart, said sector average discounts were currently at levels witnessed during the Asian economic crisis of 1998.

He said: “With the discounts of many investment companies at nosebleed levels, we see further material downside.”

However, Mr Brierley said discount levels had been distorted by the recent volatility witnessed in the alternative asset sub-sectors.

“Indeed, many of the long-only investment companies are trading at incredibly demanding levels, notably in the global growth and UK growth and income sectors," he said. “These levels are not sustainable, and when this technical situation ends, we expect a sharp widening in discounts.”

Mr Brierley warned investors to divest themselves of holdings heavily invested in equities or those that are highly geared.

Looking forward, he said the current recession was likely to be long and deep, with few clues to what shape recovery would take.

“With the major economies having only just entered what will be a long and painful recession, the spectre of deflation gathering momentum and an imminent collapse in earnings, we see little point in trying to call the bottom."

According to Mr Brierley, commentary on the measures taken to stabilise economies and financial markets bear a resemblance to reassurances given during the Great Depression.

“While we acknowledge stock markets will eventually discount the economic recovery, there are dangers in looking across to the other side of the valley."