However, Tim Cockerill, head of research at Rowan & Co Capital Management, says the current discount level on the UK smaller companies trust represents a good buying opportunity. He adds that the trust should be seen as a long-term investment that has built up a store of value, so buying at a 17% discount means it is cheap.The increase in the trust’s discount has followed dull performance over the past three years. This, Cockerill notes, is mostly because of the recent three-year bear market, in which investors have become more averse to taking on risk. As a result, says Eaglet manager Webb (pictured), the dearth of buyers of smaller companies this year has hit share prices: “Rising interest rates, accounting scandals and the underperformance of equities means there are far fewer investors interested in equities right now than I can remember in my career.” Webb’s ideal company, he says, is one that is well-managed and where outstanding value exists. Once he identifies such a company he will buy and hold it until this value is released. This means he could wait years before selling a stock, and it is this that has led it to underperform. However, Webb will not be changing his investment strategy in a bid to rescue the trust’s performance. He says: “I am confident that the values of the holdings I own right now are significantly higher than they are trading on the market. Going forward, I am sure that they will make money, but I just can’t call when this will be.” As a result Webb says the trust is currently in a “sleeping” mode in terms of performance. But he adds that when there is an improvement in the economic environment for the stocks he owns, the trust will once again outperform the market. Cockerill says the trust is still a good long-term investment, but that it should be combined with another UK smaller companies fund as part of a diversified portfolio. He adds: “The trust’s gearing will serve to enhance returns when performance is good, but it will be a drag when performance suffers. Consequently it is likely to be a volatile investment at times.” Despite increasing Eaglet’s mandate a couple of years ago to investing in companies with a market capitalisation of up to £150m, at present Webb has only eight holdings above £100m. Conversely, out of portfolio of 49 companies, 27 have market caps below £50m.