NAV is equal to the market value of securities and of other assets owned by a fund, net of all liabilities, and divided by the total number of outstanding shares. For example, if a fund owns assets of $100 million and has liabilities of $20 million, its NAV is equal to $80 million.
In closed-end mutual funds there could either be a discount (premium) to NAV if a fund’s market price is less (higher) than its NAV. This may be due to the investors’ expectations on future performances.
On occasions, mispricings may be persistent: this is the case of real estate mutual funds that cannot benefit from daily market prices to calculate their NAV. In terms of companies, NAV is usually used as a synonym for company’s book value and net worth.
The calculation of an investment company’s single share (i.e., the per share NAV) is usually calculated as total assets, less all liabilities and securities having a prior claim, divided by the number of outstanding shares. According to the above example, if we assume that the fund has 80 million shares outstanding, then the NAV per share is $1.
|Net Asset Value (NAV)|