Part of the reason for this is easy to see. If you own a collective you only pay CGT on its disposal; gains made in the fund are exempt. On the other hand, every time you sell a holding of shares you incur a potential CGT liability.
According to Threadneedle Asset Management, pounds 100,000 invested into their UK growth fund would show a gain of pounds 117,120 over four years to 5 March. The same underlying share portfolio paying 40 per CGT on realised gains on all disposals over the same period would show a net gain of just pounds 103,210, or 14 per cent less.
Until April 1998, capital gains could be reduced with an indexation allowance; put simply, this reduced a capital gain by an allowance for inflation before it became taxable. This was replaced by "taper relief" ,applied to all assets bought after 31 March, 1998. Taper relief reduces the chargeable portion of any gain according to how long you have held an investment. You need to have owned an asset for a continuous period of 36 months before you benefit from this; thereafter you benefit from an extra 5 per cent relief for each successive year you hold it, up to a maximum of 10 years.
So, if you hold an investment over just 4 years, 90 per cent of any gain will be potentially liable to CGT, but after 10 years this is reduced to just 60 per cent. The crucial point is that taper relief is calculated on your gain rather than the base purchase cost of your asset.
This means that the bigger your gain, the bigger your relief. But it also counts as an incentive to hold investments over the medium to long term.
Last year also saw the abolition of "bed-and-breakfasting" - the overnight sale and re-purchase of an investment to crystallise a capital gain and take up the annual allowance for exempt capital gains. "This was a decisive blow against shares and in favour of collectives," argues Mr Morgan. "Under the new 30 day rule, if you buy back the same share or investment fund within 30 days of disposal, you will not be allowed to receive any gains on the disposal tax free under the annual exemption allowance. Instead, you will be treated as if you had owned the investment continuously since you first purchased it.
"Take an example. Suppose you hold a share portfolio of FTSE 100 shares with a food stock like Cadbury and sell it to realise your annual gains allowance. Either you must wait 30 days - a very long time in the investment world-to buy it back, or you just have one alternative food stock, Unilever, to choose from."
For those holding share portfolios and trying to minimise their CGT liability, this can only have one of two consequences. Either they will have to stay with the same shares over very much longer, or look for choice among mid and small cap shares, with a consequent increase in risk.
But finding a close alternative among collectives is far easier. For instance, you can dispose of one FTSE 100 tracker fund and invest directly into another, with any gains on disposal falling within your exempt allowance.
This might sound academic to many of us, but CGT is here to stay and, with a prosperous, ageing population, many more of us will become liable to pay capital gains tax.