"Henderson Smaller Companies currently offers good value on a 22 per cent discount, which is towards the upper end of the one-year range of 15 per cent to 25 per cent," he said.
"The long term performance [of the trust] has been strong."
In the six months to the end of November the trust’s net asset value (NAV) rose by 22 per cent, beating its Hoare Govett Smaller Companies index, which had a rise of 13 per cent.
"Given the performance record we do not think a 22 per cent discount is justified," Scouller said.
The trust’s manager Neil Hermon has increased his holdings in oil exploration group Heritage Oil recently, as he believes the company is undervalued and a current drilling campaign in Kurdistan offers significant upside.
He also upped his position in housebuider Taylor Wimpey. The manager feels the UK housing market is far from recovery, but thinks that there is significant value in the company, as it is trading at a 60 per cent discount to prospective NAV. He sold out of the fixed income manager Bluebay Asset Management after the company received an agreed takeover bid.
Performance over 3-yrs
Source: Financial Express Analytics
Financial Express data shows the trust beating the IT UK Smaller Companies sector by 10 per cent in the year to 18 January, while taking on around 22 per cent of volatility. The sector’s average volatility for the period was 14 per cent.
The fund has also outperformed over a three year period, but took a hit in December 2008. Investors in the fund would have lost up to 60 per cent of their capital in the post-Lehman Brothers winter, while the sector average dropped 40 per cent.