Q: What are the pros and cons of investment trusts?

For the naysayers, Annabel Brodie-Smith, communications director of the Association of Investment Companies, said it was worth remembering that, as far as liquidity was concerned, 67 per cent of companies have total assets of more than £100m (excluding VCTs) and are therefore not insubstantial, while 15 per cent have total assets of more than £500m.

* Pricing structure

Company discounts or premiums are also seen as a downside to the product.

Ms Brodie-Smith said: “Love or hate investment company discounts/premiums (they have probably generated the most column inches about the sector over the years, both positive and negative), the industry as a whole has come a long way in addressing the ‘discount issue’.

“It is worth remembering that some 28 per cent of the sector now has a discount control mechanism in place, and while not a panacea for all investment companies, they can be used effectively for some.

“Ironically, whilst advisers have often cited discounts as a barrier to entry, investment companies have attracted a loyal following amongst many sophisticated private investors, who often describe the discount as one of the attractions, presenting a potential buying opportunity.

“We hope post RDR that many advisers will be able to look beyond the pricing structure.”

* Close-ended structure

The closed-ended structure is one of the investment company sector’s strongest advantages, according to Ms Brodie-Smith, because it allows managers to take a long-term view of the market without having to sell good stock to meet redemptions.

* Performance

In a rising market, Ms Brodie-Smith said investment companies almost always outperform their open ended counterparts, and while it may be a bumpier ride along the way, over the longer-term the sector has tended to deliver across a broad spectrum of sectors and risk profiles.

Recent research for the Financial Times by 4 comparing the performance of similar investment companies and open ended funds by the same fund manager found that the investment company nearly always outperformed. The figures were to the end of May 2011 and were over three, five and 10 years.

* Gearing

Gearing (or borrowing) is another key feature of the investment company sector that sets it apart from open-ended funds.

If performance is good, gearing will magnify the performance but, if performance is poor, losses will also be enhanced.