Unlike a unit trust, an investment trust is a closed-ended fund – this means that there are fixed number of shares in issue and if new investors want to buy into the fund, they have to do so via existing investors and buy shares from them. Thus, the share price of a investment trust may not match the value of the portfolio owned (net asset value). At times, the share price of an investment trust may be lower (discount) than its net asset value or it may be higher (premium). With a unit trust, shares are created when an investor buys and canceled when an investor sells – this means that the net asset value always remains at an equilibrium with a unit trust.
A major advantage of an investment trust is the flexibility that they possess, for example they can give investors access to infrastructure or unlisted smaller companies due to less strict requirements on liquidity. They are also associated with lower charges than unit trusts.