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Mr Mobius, manager of the Templeton Emerging Markets investment trust, said hedge funds and other short-term speculators still had too large an influence over discounts.

According to Mr Mobius, this has created a wide discrepancy between the NAV of a trust and its share price, causing trusts to undertake involved and troublesome buybacks.

He said there were no pre-determined conditions under which the relevant parties might wind up the trust, but they would consider the option if the discount got too wide. He added this attitude might eventually apply to the industry as a whole.

"Unless there is some way funds are allowed to open and close in some way while still being closed-end vehicles, I don't see much of a future. The UK would have to change the investment trust laws and tax regulations."

He said the trust's buyback of 30 per cent of its shares in June had gone down as the most significant moment in the history of the fund since its inception in 1989. The board approved the buyback to narrow the discount on the fund in consultation with the major shareholders and the trust's advisers UBS and ING.

"The seminal event was the recent share buyback, which wiped out 30 per cent of the fund," he said. "It created a considerable amount of difficulties in that we had to raise a considerable amount of cash."

Mr Mobius said some major shareholders had reduced their holdings as a result of the buyback, although he said some sophisticated investors could retain their positions and use derivatives to manage their exposure.

Although he said the trust would undertake buybacks if the discount widened too far, Mr Mobius said investment trust managers currently had limited control of the trust's share price. But the share price rather than NAV was what mattered to investors, he said.

"The investors don't really care about NAV. We're looking at NAV because that's what we can influence."

Mr Mobius said the influence of short-term speculators was particularly mismatched with the objectives of the trust, which is a value-oriented, long-term, buy-and-hold vehicle in line with the Templeton investment philosophy.

Last month, the FSA introduced a disclosure regime for long contract for difference positions, which investment trust speculators did not previously have to reveal to the regulator.

In February, Daniel Godfrey, director general of the AIC, said such a regime would make it easier for investors to understand stakeholder behaviour and make informed decisions about when to buy and sell trusts.