The fact they are able to invest using borrowed money has contributed to the underperformance of global investment trusts compared with global open-ended funds over the last 12 months, according to recent research by Kepler.

The total net asset value (NAV) return for the AIC (Association of Investment Companies) Global Sector has fallen by 12.2%, versus a 3.2% decline for the Investment Association global sector.

Investment trusts are able to borrow money that can be invested alongside shareholder capital, also known as gearing, while open-ended funds cannot.

Gearing is expressed as a percentage and is calculated by dividing borrowings by net assets. It can magnify shareholder performance in both directions.

According to Kepler 10 out of 16 sampled investment trusts use some form of gearing.

Martin Currie Global Portfolio Trust (MNP) and Scottish Mortgage Investment Trust (SMT) are amongst the worst performers in the global sector during the last 12 months.

They are also fairly highly geared (11%), and focused on growth stocks which have struggled against a backdrop of rising interest rates.

Kepler reveals that Global Opportunities Trust (GOT) and Brunner Investment Trust (BUT) trade at significant discounts to net asset value, of 13.7% and 10.2% respectively.

They also both have a negative one-year Z-score indicating that their discount today is wider than its average over the past 12 months.

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