Investment trusts can invest in virtually anything, including private companies whose shares are not listed on any stock exchange and property.
Some are general, investing in a broad portfolio of shares. Others are more specialist, investing in smaller companies, commodities, emerging markets or single countries.
There are a number that are venture capital specialists, funding management buy-outs from large companies or investing in start-up businesses. Split capital funds allow investors to buy shares which will receive either all the income earned by the fund or all the capital growth.
Investment trusts have the ability to raise loans if fund managers feel interest rates are low and they can make a good return on the money borrowed.
Because they are listed on the stock market, most investment trusts can carry higher risks than similar unit trusts as their share prices are determined by investor demand.
If this is low, the share price can be below the trust's net asset value. This is called a discount.
Today the discount averages 11 per cent for investment trusts. This means that an investor can buy pounds 1 worth of assets for 89p.
Many management groups are trying to narrow their discounts, some by buying in shares. If they succeed and discounts narrow, this will lead to a gain even if their net asset values do not change.Reuse content