But now that argument is less clear. Investment trusts were cheaper largely because they didn’t pay commission. Now that the RDR has done away with commission, and open-ended investment companies (Oeics) and unit trusts have launched clean-fee share classes, investment trusts are not as cheap as they once were.

Baillie Gifford has recognised this and recently lowered the annual management charge (AMC) on four of its trusts, explicitly stating that it was doing so in order to remain competitive with open-ended funds.

Anthony Bolton’s Fidelity China Special Situations fund then followed suit and it seems we may be seeing a trend emerging. “I hope this is the start of more fee cuts,” says Stephen Peters, investment trust analyst at Charles Stanley.

“Any fee cut is good and we hope other trusts follow the example of Baillie Gifford and Fidelity.”

Simon Elliott, head of investment trust research at Winterflood Securities, compared the charges between closed and open-ended funds at the end of last year, using the cheapest share class for open-ended funds. He found that investment trusts were still cheaper 62 per cent of the time, with open-ended funds cheaper 23 per cent of the time, and the rest having little to no difference.

Mr Elliott says the RDR has acted as a catalyst to put the spotlight back on investment trust fees and boards will now come under pressure to negotiate down their charges. He explains: “If there is a significant difference for the annual management charge of an open-ended fund and an investment trust, the trust will have to change its fee. That is why Baillie Gifford changed their charges.”

David Coombs, head of multi-asset investments at Rathbone Unit Trust Management, agrees that those trusts that are more or less a “clone” of open-ended funds will need to cut their fees, because some “are just too high”.

Mr Coombs says Mr Bolton’s Fidelity trust’s fees were far too high before it was cut to 1.2 per cent. He also highlights the Templeton Emerging Markets investment trust whose AMC – currently 1 per cent – is too high.

“This is especially relevant for wealth managers, who buy a lot of investment trusts,” he says. “Large cap core equity investment trusts will have to cut their fees if they want to remain competitive.”

Ian Sayers, director general of the Association of Investment Companies (AIC), says the advent of the RDR has made it clear that “where there was a cost advantage for investment trusts with comparable funds, it is going to be narrowed and potentially eliminated.”

Mr Sayers says that investment trusts cannot “sit on their laurels” and blithely assert that they are cheaper than open-ended funds, but he maintains that they “will not remain static and will react to the competitive forces”.

However, Tim Cockerill, head of collectives research at Rowan Dartington, says it will take time for investment trusts to adjust to the new reality of lower fees. “A lot has been made of the impact of the RDR on investment trusts, but it will be a slow burn,” he says.

“Some investment trusts were never thought of as a mainstream investment for the retail market, so they will feel under no pressure to make themselves more attractive.”

The focus on fees has also raised questions over the proliferation of performance fees. Many hope investment trusts will scrap their performance fees as well as lowering their AMCs.

Mr Peters says he hopes performance fees will be scrapped because “they do not align the interests of the manager with those of the investor as trusts claim they do.”

With AMCs already under pressure, this could be the next area for reform.

Matthew Jeynes is senior reporter at Investment Adviser

EXPERT VIEWS

Investment trust charges

Adrian Lowcock, senior investment manager at Hargreaves Lansdown:

“We will see more competitiveness on price post-RDR, and we may see these reductions in charges becoming a growing trend, but investment trusts have many other challenges that aren’t related to cost, such as liquidity concerns and the impact of news flow on the share price.”

David Coombs, head of multi-asset investments at Rathbone Unit Trust Management:

“A performance fee could only be justified if it is on a long only equity fund and the fee is above an index such as the S&P 500 with a high watermark. I would not be interested in any performance fee in absolute terms – it is outrageous to have a performance fee above Libor.”

Stephen Peters, investment trust analyst at Charles Stanley:

“Along with reducing charges, investment trusts also need to pay better attention to discounts and using discount control mechanisms. With the market rallying we can’t see if they have improved in that area and it would take a sustained pullback in the market to see if they are up to scratch now.

“The cut in the AMC of the Fidelity China Special Situations trust could be a reflection of its poor performance and the general dissatisfaction from investors at the way the trust has performed. They launched it at a difficult time and performance has not impressed many.”