The firm analysed the performance, cost and volatility of 40 fund managers that run both an investment trust and fund to a similar strategy.
In 75 per cent of cases, the investment trust outperformed the fund on a total return basis over a 10-year period.
Analysis of costs found that 60 per cent of investment trusts were cheaper than their comparable open-ended vehicle, at an average of 0.91 per cent and 0.97 per cent of assets, respectively.
However, the research highlighted the higher volatility of investment trusts as a result of their ability to gear – a feature that can boost returns when markets are rising, but amplify losses during difficult periods.
Gearing is the process of taking on debt to invest and boost return multiples in the process.
Laura Suter, personal finance analyst at AJ Bell, said: "Investors don’t get this extra performance for free and they have to be prepared for a bumpier ride. This shows in the figures, and a whopping 90 per cent of the time the trust is more volatile than the equivalent fund."
The research cited manager Nick Train as an example. He sits at the helm of the £7.1bn Lindsell Train UK Equity fund and the £1.8bn Finsbury Growth & Income trust.
According to the research the fees on the funds are almost identical but the trust has returned 498.6 per cent over 10 years, compared with 432.8 per cent for the fund.
Ms Suter added, however, that during the time period investors in the trust would have experienced more volatility as a result of the gearing that currently stands at 1.2 per cent.
The research also looked at Alex Wright’s Fidelity Special Situations fund and Fidelity Special Values investment trust, the latter of which is actually more expensive that its open-ended cousin at 1.05 per cent and 0.91 per cent, respectively.
Ms Suter said: "Despite this potential fee drag, the trust has outperformed the fund by almost 50 per cent more over 10 years, returning 268.5 per cent compared to 187.8 per cent, although Mr Wright hasn’t run the fund for that entire time."
Adrian Lowcock, head of personal investing at Willis Owen, said: "This is interesting and the analysis highlights one of the benefits of investment trusts, that during a bull market in equities trusts benefit from being able to borrow money - gearing - which means that trust investments effectively get a boosted exposure to the stock market and the investments the fund manager chooses."
He added: "The issue is that this can work both ways and during a period of underperformance or falling markets investors also potentially get greater exposure to losses.
"These losses can be exaggerated, as well as investors might also suffer from the share price falling from a premium to a discount. So investment trusts can be more volatile and are not necessarily well placed to protect investors' capital in market downturns.
"The actual returns investors get also depends on the price they pay. If they buy the trust at a significant premium to net asset value, they could suffer big losses just due to a change in sentiment.
"Having said that, investment trusts are suitable and useful vehicles for more experienced investors, comfortable with the more complex nature of the pricing mechanism of investment trusts."
Jennifer Turton is a freelance journalist
