Listed investment companies (LICs) could be a screaming buy with the sector trading at its largest discount in years. But after a tough time for the companies, the market is wary.

LIC bears say the sector has worsening structural problems. Too many LIC initial public offerings (IPOs) in the past three years created investor fatigue and unstable share registers in newer funds. The Australian Financial Review in July reported that lucrative float fees might be encouraging advisers to recommend risky LICs.