An investment trust is a unit trust in a slightly different guise. The key difference is that it is a closed-ended unit trust. The fund has a finite number of units, and these cannot be created or cancelled. The distinction between investment trusts and unit trusts centres on how units are traded and how their price is determined.

The most common form of investment trust is in fact not a trust structure but that of a company. The shares or units of investment trusts are traded on the stock exchange. The price of units depends – as with company shares – on what buyers and sellers believe the units are worth in relation to the trust’s assets and earnings potential.

Investment trusts are traded on a stock exchange, despite the fact that they are similar to unit trusts. This means that the entry costs are higher than unit trusts, because the investor would have to work through a stockbroker. The fact that shares are often traded in large lots also affects the liquidity of investment trust units.