What Is Net Asset Value (NAV) and How Is It Calculated?

Fund NAV per unit = (Total Assets - Total Liabilities) / Units Outstanding Total Assets: market value of all holdings in the fund Total Liabilities: management fees accrued, other costs owed Example: Actively managed UK equity fund Portfolio market value: £485,000,000 Cash held: £12,000,000 Total Assets: £497,000,000 Management fee accrual: £750,000 Other liabilities: £250,000 Total Liabilities: £1,000,000 Net Assets: £496,000,000 Units in issue: 200,000,000 NAV per unit: £496,000,000 / 200,000,000 = £2.48

Unit trusts and OEICs: NAV calculated once per day (usually at midday or market close) Buy/sell price = this daily NAV (plus/minus small spread for dual-priced funds) ETFs: NAV calculated continuously during market hours Shares trade on an exchange — price can deviate from NAV Premium to NAV: ETF share price > underlying asset value (can happen) Discount to NAV: ETF share price < underlying value (potential opportunity) For major global ETFs, the arbitrage mechanism keeps the ETF price within 0.01-0.05% of NAV during trading hours.

NAV per share = (Total Assets - Total Liabilities) / Shares Outstanding = Total Equity / Shares Outstanding = Book Value per Share Example: Property company Total assets: £2.1 billion Total liabilities: £1.3 billion Total equity: £800 million Shares outstanding: 400 million NAV per share = £800m / 400m = £2.00 If the share price trades at £1.60: Discount to NAV: 20% (common for UK investment trusts and property companies)

Tangible NAV removes intangible assets (goodwill, brand value, patents) that have uncertain realisable value in a liquidation. Total equity: £800 million Intangible assets: £350 million Tangible NAV: £800m - £350m = £450m Tangible NAV per share: £450m / 400m = £1.125 Many value investors use tangible NAV as the more conservative "floor" value of a company — what it would realistically be worth in a forced sale.