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Net asset value: Difference between revisions
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Known colloquially as | {{a|pb|}}Known colloquially as “[[NAV]]”, [[net asset value]] is the value of an [[investment fund]] from the investor’s perspective. Generally assets minus liabilities: assets being the investments your [[investment manager]] has put you into; liabilities usually taking the shape of [[borrowed money|money borrowed]] by the fund to [[Leverage|lever]] up your investment, which you have to pay back first — your name is [[Vega]], and you live on the second floor — and any [[unfunded]] investments (like [[swaps]]) that happen to be under water for the time being. | ||
{{ | ===[[NAV per share]] versus [[outright NAV]]=== | ||
NAV can be defined across the whole fund — a gross number, like U.S.$5bn — or per share (if you have 1,000,000 shares in issue, U.S.$5bn/1,000,000 = U.S.$5,000. While these things like different ways of saying the same thing, note the different effect here of '' fund redemptions'' versus ''decline in investment value''. | |||
Say the portfolio declines in value by a billion, but no-one redeems. Now [[outright NAV]] is U.S.$4bn, and [[NAV per share]] is U.S.$4,000. | |||
But if 200,000 shareholders redeem out of the fund, but the assets in the fund maintain their value, while you have still lost a billion from the fund and your outright NAV is still U.S.$4bn, [[NAV per share]] remains at U.S.$5,000. | |||
In one way, an investor redemption is more benign than a decline in asset values, seeing as the actual investments are performing just as well, just on a smaller base — and you would ''expect'' a prudent investment manager to cut the size of its derivative positions by a proportional amount, to match the size of the adjusted portfolio. But investment managers might not always do that — especially if they are being risked on a NAV per share basis. | |||
Realistically, the two tend to be closely correlated. If the fund’s performance is going gang busters, people tend to HODL. If, on the other hand, it’s going full Neil Woodford, expect to see big investor outflows, at which point hello [[redemption gate]] buried on page 94 of the [[prospectus]]. | |||
{{NAV and pension liabilities}} | |||
{{sa}} | |||
*[[NAV trigger]] | *[[NAV trigger]] | ||
*[[Pension fund]] | |||
*[[Hedge fund]] | *[[Hedge fund]] | ||
*[[Leverage]] | *[[Leverage]] | ||
*[[Greeks]] | *[[Greeks]] | ||
{{c|Hedge fund | {{c|Hedge fund}} | ||