“But the events of 11 September, when equities were sold off left, right and centre, sent the price falling. I decided to switch from unit trust holdings into the investment trust when the price touched 105p, and the investment trust shares were at a 19 per cent discount.”Since then, Liontrust First UK has improved to around 120p, where it is on a near 9 per cent discount, and has performed better than its sister unit trust. “When the opportunities arise, it can be very worthwhile to switch,” Mr Burns says. “It doesn’t work when the investment trust price is at a premium, as it is with such as Fidelity Special Values.

It works best when there is a narrow discount on an investment trust that suddenly widens for some reason, and where you think there is every likelihood it will narrow again.”The present turmoil over split-capital investment trusts, with the Financial Services Authority investigating funds that purchased each others’ shares in a dangerous game of pass-the-parcel, has done nothing to help sentiment towards the sector. Individuals continue to prefer unit trusts and the similar open-ended investment companies (OEICs), which have benefited in what has been a muted individual savings account (Isa) season so far.Many advisers feel investment trusts are too complicated for ordinary savers, who can understand unit trusts and OEICs much more easily. “Lots of the so-called benefits of investment trusts don’t often stand up in the harsh light of day,” says Jason Hollands of Bestinvest, one of the few low-cost independent financial advisers (IFAs) who also offer advice.Some beg to differ. “The general problem is that many advisers still do not understand investment trusts and can’t, therefore, give an opinion on them,” Roddy Kohn, of the Bristol-based IFA, Kohn Cougar, says.Investment trusts appear to be more complicated animals They are companies whose business happens to be investment. Their own shares are traded on the stock market, and are therefore subject to the vagaries of supply and demand in ways that unit trusts are not.For example, much is made of whether a particular investment trust is at a discount or premium to net asset value. But the sector’s supporters say this is not really all that relevant. Unit trusts and OEICs are priced at net asset value, less some costs wrapped up in their charges, so the value of the units are the total value of each fund divided by the number of units.Sometimes investment trusts let themselves down by not always being clear about what they invest in, unlike a unit trust.

The latter will always have an up-to-date portfolio available for would-be investors to look at, but they would have to rely on an investment trust’s annual and interim reports.But, as Mr Burns has realised, if fund manager runs similar funds there can be opportunities to make short-term gains when the investment trust falls out of line with its sister unit trust Investment trusts appear to have two big advantages. One is gearing, the ability to borrow money which they can invest for better returns. The trust pays interest on the loans, but any excess profits flow through to the trust’s shareholders without them having to put any more money in. This means that if a trust is 20 per cent geared, it can invest 120 per cent of its net total value, with the benefit returning to shareholders if its investments rise in value. But this whiplash effect can work both ways; the interest charges still clock up even if the value of the investments goes down.”This can play an important role in the success or failure of a trust,” Mr Kohn says.

“And never more so than in conditions similar to what we have today. Any rapid recovery in equity prices will benefit the geared trust that has invested shrewdly.”The other benefit is that investment trusts are closed funds, meaning no new shares will be created unless they have a rights issue approved in advance by shareholders. Unit trusts, on the other hand, can issue units to reflect the underlying asset value and extinguish them when investors sell.”This come to the fore in volatile and falling markets,” Mr Hollands says. “Because of the need to have liquidity, open-ended unit trusts may have to sell their best holdings to pay off any redemptions. An investment trust can hold on to them, as we have seen in when the technology and emerging markets have crashed.” But this means investment trust followers may need to follow the movement of the stock market more closely than unit trust fans. Other claimed advantages for investment trusts are less real It was always argued that they had much lower costs. But fund supermarkets and heavy discounting of charges have brought unit trust costs closer into line.