Investment trusts have seldom been the first port of call for Britain’s retail investors, who prefer the familiarity of conventional open-ended funds and direct stakes in listed companies. As returns-hungry investors seek new opportunities, however, what was once “the City’s best-kept secret” is moving into the mainstream. 

In a comparison of conventional open-ended funds versus investment trusts to the end of September 2021, trusts outperformed funds in more than 70 per cent of the last five and 10-year periods, according to Morningstar. Total returns from 14 out of 20 investment sectors were higher from closed-ended funds than from open-ended ones over both those medium to long-term periods.

What makes investment trusts different from other funds — and how can investors go about choosing one?