While in London an activist hedge fund is challenging investment trust boards to capture the gap between market price and underlying value, a similar inefficiency exists in Italy’s real estate funds. The difference is that the price is not public, liquidity is thinner, and the underlying hotels require expertise that rarely sits at the same table as financial capital.
The case
On 24 August 2026, Saba Capital Management, the activist fund founded by Boaz Weinstein, opened another chapter in its battle with Baillie Gifford US Growth Trust, a London-listed investment trust with a market value of roughly £900 million.
Saba, which controls approximately 29% of the voting rights when shares and financial instruments are taken together, requested that shareholders vote at the November annual general meeting on the appointment of Jason Chen, Thomas H. McGlade and James Waterlow to the board. (Investegate)
This is not the first confrontation.
In December 2024, Saba had already sought to replace the trust’s board. The proposal was rejected by shareholders the following February. In December 2025, by then holding a sufficiently large position to influence voting outcomes, Saba also blocked the proposed merger between Baillie Gifford US Growth Trust and Edinburgh Worldwide Investment Trust. (London South East)
Edinburgh Worldwide itself provides an important precedent: in April 2026, three directors backed by Saba joined its board following an extended shareholder battle. (Association of Investment Companies)
The economics behind the strategy are more interesting than the corporate drama.
Saba builds significant stakes in vehicles trading below the value of their underlying net assets and then seeks to trigger an event capable of narrowing that gap: governance change, share buybacks, liquidation, merger, strategic repositioning or a change in management.
The return, in this type of strategy, does not necessarily come from asset appreciation. It can come from the compression of the discount.
Why should a battle involving a British equity investment trust matter to anyone buying, selling, financing or operating hotels in Italy?
Because the underlying assets are entirely different, but the economic principle is strikingly similar.
Identify a wrapper that the market values below the assets it contains, then identify the catalyst capable of converting that gap into realised value.
That is where the story intersects with Italian hotel real estate.
Buy the wrapper, not the asset
In listed closed-end funds, the difference between the market price of the shares and Net Asset Value is immediately observable.
The market tells you what the shares are worth.
The NAV tells you the accounting value of the underlying assets attributable to those shares.
The gap can be measured every day.
In reserved Italian real estate alternative investment funds, or FIA, the situation is different and, in some respects, more interesting.
There is not necessarily a continuously observable public market price. The discount emerges when an investor wants to sell its interest on the secondary market and meets a buyer willing to acquire it.
Price therefore becomes the product of a negotiation between parties facing very different constraints:
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liquidity requirements;
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portfolio reallocation;
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asset-allocation limits;
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fund maturities;
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a desire to reduce real estate exposure;
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asset-liability management requirements;
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excessive concentration;
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disposal of investments considered non-core.
The buyer is not negotiating the price of the hotel directly.
The buyer is negotiating the price of an economic interest in the vehicle that owns the hotel.
That distinction matters.
The illiquidity discount embedded in the fund interest can be significantly greater than the discount obtainable through a direct acquisition of a competitive hotel asset marketed for sale.
Put differently:
it may be possible to buy the wrapper at a discount even when the underlying asset itself could never be bought at the same discount.
The Italian market has become larger — and less visible
Anyone who remembers Italy’s former market for listed retail real estate funds will also remember a system in which NAV, share price and discount were publicly available figures.
That market gradually contracted as many of the old retail funds reached maturity and entered liquidation.
The capital managed through real estate funds, however, did not disappear.
It grew and migrated overwhelmingly towards vehicles reserved for professional investors.
According to the 48th Rapporto 2026 by Scenari Immobiliari and Studio Casadei, approximately 700 real estate fundswere operating in Italy as of 31 December 2025, with an aggregate NAV of €125.7 billion and approximately €144.5 billion of directly held real estate assets.
For 2026, further growth is expected: around 5% in NAV and 5.5% in property assets, with the number of funds approaching 720. (Unione Immobiliare)
The distinction between those figures matters.
NAV measures the net value attributable to investors after liabilities.
Property assets measure the value of the real estate held by the funds.
Confusing the two, particularly where leverage is involved, means confusing the value of the equity with the value of the assets.
And leverage is one of the variables that matters most when analysing a NAV discount.
Italy’s fund industry is also highly concentrated: 61 asset management companies manage approximately 700 funds, with the leading managers accounting for the overwhelming majority of active vehicles. (Unione Immobiliare)
The result is an enormous market that is far less visible from the outside than a listed exchange.
The discount has not disappeared. The ticker displaying it has.
And those funds increasingly own hotels
For the hotel sector, another figure is even more important.
According to the same 2026 report, hospitality now accounts for approximately 7% of Italian real estate fund portfolios. (Unione Immobiliare)
It is no longer a marginal allocation.
Hotel assets have entered financial vehicles through several very different routes.
Contribution transactions
Over time, hotel-owning groups and operators have separated real estate ownership from operations, contributing the property into investment vehicles while retaining the operating business through leases, business leases or management agreements.
Some of these vehicles are now mature, extended, approaching maturity or actively disposing of assets.
Value-add portfolios
A second category consists of assets acquired under repositioning business plans.
The pandemic, higher financing costs, construction-cost inflation and permitting delays have prevented some original plans from being executed on schedule.
The result can be an asset formally valued under one set of assumptions while remaining operationally far from the performance on which those assumptions were based.
Assets entering through credit situations
There is then a third category: hotels that have entered financial structures through debt restructurings, enforcement processes, securitisations, UTPs, NPLs or turnaround transactions.
In these situations, the financial owner may have exceptional expertise in credit and real estate but limited industrial hotel expertise.
This is particularly relevant for restructuring and value-creation situations of the kind analysed by Investhotel.it.
And it is precisely at the intersection of capital, property and operations that the key question changes.
It is no longer simply:
What is this hotel worth today?
It becomes:
What could this hotel be worth under a different operating structure?
The real arbitrage is not NAV versus price
A crucial distinction is required here.
A discount to NAV does not automatically equal the same discount to the value of the underlying real estate.
Assume, for simplicity, that a fund owns properties worth 100 and carries debt of 50.
Its NAV is therefore 50.
If an investor acquires all the fund interests for 30, it is buying the equity at a 40% discount to NAV.
But economically, it is gaining exposure to 100 of real estate assets by paying 30 for the equity while indirectly assuming 50 of debt.
The implied enterprise value of the transaction is therefore 80.
The real discount to GAV is not 40%. It is 20%.
And before calling that discount a return, the investor still needs to account for:
capital expenditure, transaction costs, taxation, financing costs, contractual penalties, working-capital requirements and the time required to achieve an exit.
That is why NAV discount and asset discount are not the same thing.
This is exactly where financial analysis must meet real estate and operating analysis.
The catalysts: a discount is not enough
Buying something below NAV does not mean value has been created.
It simply means a problem has been purchased at a lower price.
For the strategy to work, a catalyst is required.
In Italian real estate, the most relevant catalysts are often linked to time or contractual structure.
Fund maturity
Time changes bargaining power.
A vehicle that must progressively realise its portfolio operates under very different conditions from a property owner without a fixed exit horizon.
As maturity approaches, the value of time itself becomes part of the price.
Extensions
An extension does not automatically mean that the NAV is wrong.
It may reflect market conditions, asset complexity, permitting procedures or a decision to avoid a forced sale.
But it still communicates something important:
the value attributed to the portfolio has not yet been converted into cash within the original timetable.
For an investor, that matters.
Disposal of an investor’s stake
An institutional investor may need to exit for reasons that have nothing to do with the quality of the underlying property.
This is potentially one of the most interesting situations.
The seller may have a portfolio problem.
The buyer may see an asset opportunity.
The price is created by the difference between those two perspectives.
Liquidation and restructuring
Depending on the structure, the final phase of a fund may create room for transfers, contributions, corporate reorganisations or transactions that redefine the economic perimeter of the portfolio.
This does not mean that an investor can impose a solution.
It means entering the discussion at the moment when a solution must be found.
Why look at the fund interest rather than the hotel
There are at least four reasons.
1. Entry price
The price of a fund interest may reflect the illiquidity of the vehicle, the seller’s requirements and the complexity of the structure.
These are different factors from the intrinsic quality of the property.
The mispricing may therefore originate at the financial level rather than at the real estate level.
2. A different competitive process
A hotel formally marketed for sale can attract operators, family offices, investment funds, private equity and international investors.
A stake in a reserved FIA often circulates through much less visible channels and bilateral negotiations.
That does not mean there is no competition.
It means competition is less transparent.
3. Governance rights
A qualified participation may, depending on the fund rules, investor agreements and structure of the vehicle, provide governance rights that are materially different from those obtained by simply purchasing the property.
Investor meetings, advisory committees, reserved matters, extraordinary transactions and potential manager-replacement mechanisms must all be analysed case by case.
The percentage alone is not enough.
What matters is what that percentage legally allows an investor to do.
4. The second layer of value
A hotel contains at least two economic dimensions.
The real estate.
And the operating business.
Where PropCo and OpCo are separated, focusing solely on the value of the property can mean leaving a significant portion of potential value uncaptured.
The structure of the lease, business lease or hotel management agreement directly affects the ability to reposition the asset and, therefore, the price a future investor will ultimately be prepared to pay.
This is a central theme in the analysis published on InvestimentiAlberghieri.it:
a hotel property cannot be valued independently of the operating business that must generate the income supporting that valuation.
The risks, without sugar-coating them
A NAV discount is not free money.
Presenting it as such would be intellectually dishonest.
NAV is an estimate, not a cheque
An independent valuation does not necessarily represent the price obtainable tomorrow in the market.
With hotels, the gap can be even greater because valuation depends on ADR, occupancy, GOP, capex, brand, contractual structure and management capability.
A 40% discount to a NAV that is itself 40% overstated is not an opportunity.
It is an accounting illusion.
Leverage can distort the apparent discount
A very large discount at equity level may correspond to a much smaller discount to the gross value of the assets.
Comparing opportunities therefore requires reconstruction of the entire capital structure.
Deferred capex is economic debt
It may not appear as financial indebtedness.
But a hotel requiring €15 million of refurbishment has, economically, a €15 million capital requirement.
That amount must be deducted from the value the buyer believes it is acquiring.
Contracts can matter more than the walls — positively or negatively
Long leases at off-market rents, business leases, renewal clauses, management agreements, termination fees, guarantees, key money and covenants can turn an apparently attractive asset into a highly constrained investment.
They can also do the opposite.
A well-structured hotel agreement can materially enhance both bankability and real estate value.
Illiquidity works both ways
If an investor enters at a discount because the market is illiquid, it cannot assume it will exit tomorrow at NAV.
Without an identifiable catalyst, an exit strategy and a holding period consistent with the capital deployed, the discount may simply remain a discount.
The expertise missing from the table
This is where the issue becomes genuinely hotel-specific.
Analysing a fund containing hospitality assets requires the ability to understand simultaneously:
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the fund rules;
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governance;
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waterfall structures;
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leverage;
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debt;
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maturities;
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investor rights;
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disposal mechanisms;
and also:
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ADR;
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occupancy;
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RevPAR;
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GOP;
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staffing structure;
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distribution;
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market positioning;
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capex;
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FF&E;
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management agreements;
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business leases;
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property leases;
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repositioning potential;
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post-intervention value.
Those two skill sets rarely coexist in the same decision-making process.
The financial investor understands the vehicle and receives the operating data.
The hotel operator understands the business but rarely analyses the fund structure.
The real estate investor looks at price per square metre and yield.
The operator looks at GOP.
The bank looks at debt.
The investor looks at IRR.
But value is created precisely where all these perspectives must become a single model.
This is the point at which hotel advisory moves beyond conventional operational consulting and begins to resemble merchant banking applied to hospitality: analysing capital, real estate, operating business and contractual architecture as components of the same investment.
It is an approach I also explore on RobertoNecci.it, while Investhotel.it focuses in particular on situations where value creation, turnaround, credit and restructuring need to be considered together.
The Italian asymmetry
Saba operates in a listed market.
The price is public.
NAV is public.
The discount can be calculated.
Large shareholdings are disclosed.
Analysts cover the stock.
Shareholders vote.
And yet, even in such a transparent market, a specialist investor can build an entire strategy around the gap between market price and underlying value.
In Italy, real estate funds hold more than €140 billion of property, hospitality already represents approximately 7% of portfolios, and the largest part of the industry exists outside public stock markets. (Unione Immobiliare)
That does not mean every fund interest is undervalued.
It does not mean every fund contains a hotel available at a discount.
And it certainly does not mean that acquiring a participation is sufficient to change the manager, governance or strategy.
It means something much more interesting.
The market contains an entire layer of opportunities that cannot be found simply by searching for “hotels for sale”.
To identify them, an investor needs to ask:
Who owns the property?
Through which vehicle?
Who owns the vehicle?
When does that investor need to exit?
How much debt is there?
What rights are attached to the fund interest?
What contractual relationship exists between PropCo and OpCo?
How much capex is actually required?
How much does the hotel generate today?
And above all:
how much could it generate under a different operating model?
Only then does the NAV discount stop being a percentage.
It becomes a potential strategy.
The back door
For years, the Italian hotel investment market has searched for opportunities by starting with the property.
Hotels for sale.
Closed hotels.
Hotels in insolvency proceedings.
Conversion opportunities.
Portfolios formally brought to market.
But there is another entrance.
It is less visible.
And it does not begin with the hotel.
It begins with the structure that owns it.
The fund interest before the property.
Governance before the sale.
The contract before the bricks and mortar.
The catalyst before the discount.
Operations before the final valuation.
Saba has built a strategy around finding this gap in a listed, transparent market followed by professional analysts.
In Italian real estate, the same type of gap may exist inside vehicles that have no public market price.
And inside those vehicles are hotels.
The difference is not simply the size of the opportunity.
It is the number of people looking through the front door while value may be moving through the back.
Hotel investment analysis
Whether the opportunity involves a fund interest, a hotel property or an operating company, the analysis should begin with the same question:
What is the true value of the transaction once capital structure, debt, contracts, capex, operating performance and potential value-creation scenarios have all been reconstructed?
For analysis of specific hotel investment situations:
RobertoNecci.it
Investhotel.it
InvestimentiAlberghieri.it
Contact: r.necci@robertonecci.it
This article is intended solely for editorial and informational purposes. It does not constitute an offer, investment solicitation, personalised investment recommendation or financial advice. Any transaction involving alternative investment funds, corporate interests or real estate assets requires specific legal, tax, financial and industrial analysis. The data cited are based on publicly available sources as of 24 August 2026.
