But the Retail Distribution Review, which came into force in 2012, removed commission bias from the system so that recommendations made by advisers are not influenced by product providers, resulting in greater transparency for retail investors.
Mr Budden explains that it was not structurally possible to earn commission on closed-ended funds in the same way as open-ended funds.
He adds: “On open-ended funds you could pay commission per unit.
"Closed-ended funds are listed companies on the stock market – you cannot create a share in the same way you can create a unit.”
Breaking new ground
Nick Britton, head of intermediary communications at the Association of Investment Companies, acknowledges: "The investment company industry, throughout its history, has continued to adapt to meet investors’ needs and, in the last decade, the infrastructure, debt and property sectors have evolved to satisfy demand for income."
"The investment company industry has continued to invest in groundbreaking opportunities including technology, biotechnology and healthcare, emerging and frontier markets, private equity and venture capital," adds Mr Britton.
Mr Garg shares the view that investments trusts are popular because of their ability to move with the times.
“Throughout its long history, [investment trusts have] been involved in groundbreaking investments, mainly technology,” he says.
Mr Garg adds: “This includes investing in railroads and natural resources, in addition to bonds, and with technology reaching greater heights this past decade, has shown to investors its drive to look ahead.”
By the end of the 19th century, there were 71 investment trusts in England and a further 11 in Scotland.
In comparison, at the end of January 2018, there were 389 UK investment companies with total assets under management of more than £174bn, says Alex Howe, head of investment trust sales at BMO Global Asset Management.
saloni.sardana@ft.com
