In 2018, Cass Business School produced a study that took into account every issue they could think of that might distort the comparison between investment trusts and open-ended funds and still found that the trusts had outperformed by about 1.4% a year over the previous 18 years. Compound that over a couple of decades and you are talking real money. They work brilliantly for anyone wanting to hold illiquid assets — this is the way to invest in micro caps, infrastructure, property and renewables. They can use borrowed money to pump up returns — and history suggests they more often than not add value in doing so. Possibly best of all, they have active boards of directors charged with representing the long-term interests of shareholders. This appears to make a genuine difference: even after Cass had adjusted for sectoral bias, gearing and share buybacks, the outperformance of trusts was still about 0.8% year, which suggested to them some kind of magic in the structure of investment trusts. So what is not to like? A few things. The first is cost. Until relatively recently trusts were generally cheaper than open-ended funds (and we all know that current costs are one of the main drivers of future returns). This may no longer be the case. Management fees have fallen for both types of investment but costs have risen for investment trusts. Regulation never stops increasing for listed companies and each new clause and sub clause pushes up the cost of compliance. As trusts lose their cost advantage, will they also lose much of their performance advantage? The jury is still out on this, though one obvious way to mitigate the cost risk is for smaller trusts to merge and make some economies of scale.

There is also tax risk. One of the cornerstones of the trust model is the rule that as long as a trust pays out 85% of the dividend income it receives to its shareholders, it does not have to pay capital gains on share sales made within the trust. This is to prevent shareholders effectively paying CGT twice — once on the sale inside the trust and again when they sell the shares in the trust. However, there is the chance that this may change whilst the chancellor Rishi Sunak reviews the structure of CGT – this should be closely monitored.