Glossary · UK
What is Net Asset Value (NAV)?
The total value of a fund's underlying assets minus its liabilities, divided by the number of shares or units in issue, giving the value of each unit.
Full Definition
Net Asset Value (NAV) is the total value of a fund's underlying investments (its assets) minus any liabilities, such as fees owed or borrowing, divided by the total number of shares or units the fund has in issue, giving a single per-unit value that reflects what each investor's holding is genuinely worth based on the fund's actual portfolio. For an open-ended fund such as a unit trust or OEIC, the price an investor buys or sells at is normally set directly at, or very close to, the fund's NAV, calculated once (or sometimes more often) each dealing day, so the price closely tracks the value of the underlying assets held. For a closed-ended fund such as an investment trust, by contrast, the fund's shares trade on the stock exchange at whatever price buyers and sellers agree, which can differ from the underlying NAV -- trading at a premium (above NAV) when investor demand is strong, or at a discount (below NAV) when demand is weak -- creating both an additional source of potential gain (if a discount narrows) and an additional risk (if a discount widens) that does not exist for open-ended funds priced directly at NAV. Investment trust factsheets and platforms routinely publish both the current share price and the NAV per share side by side specifically so investors can see the size of any premium or discount, which is one of the key differences to understand before choosing between an investment trust and an open-ended fund investing in a similar market.
How Net Asset Value (NAV) is calculated
NAV per share/unit = (Total fund assets - Total fund liabilities) / Number of shares or units in issue