A reduction in the level of gearing used by investment trusts suggests that fund managers in the closed-end space are becoming more cautious.

Financial services group Winterflood calculates the average level of net gearing among the 200 investment trusts invested in equities has fallen from 8% at the start of 2017 to 6% at present.

It says the number of trusts with gearing above 10% has fallen from 45 at the start of the year to now sit at 36. The number of ungeared trusts has risen from 75 to 84 over the same period.

Gearing involves a fund manager using debt to invest in more companies or other assets in order to boost the value of a portfolio. It creates a bigger pool from which to earn dividends and/or generate capital gains.

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