How to calculate a Net Asset Value per Share

A fund administrator is required to calculate the net asset value (NAV) per share every accounting period and, typically, once per year at a minimum

The manager of the mutual fund must then provide various information such as the value of assets and liabilities, as well as all costs borne by the mutual fund.

 

  • The first step is to calculate the total value of the asset and generate a profit or a loss calculation depending on market value (at the start and end of the business period) and the currency exchange rates.

  • The second step is to calculate the total value of liabilities; the amount of  interest and costs borne by the mutual fund on its debts.

  • The third step is to gather the expenses borne by the mutual fund and book provision in the accounting  to make sure these costs are well apportioned over the different NAV periods (audit costs, custodian fees, administrator's fees, taxes, etc).

 

With these steps completed, the fund administrator has sufficient information at hand to calculate the total assets minus the total liabilities of the mutual fund - which gives the equity of the mutual fund - its own funds - this is the gross asset value (GAV).

Depending on the type of mutual fund held, the Offering Memorandum will specify the way in which the manager is to be remunerated and the fund administrator is required to calculate the management fee, performance fee or any other fees which are due to the manager of the mutual fund or its advisers.

The management fees are typically calculated on the gross asset value whereas performance fees are typically calculated as a percentage of the increase in the GAV over the period.

Once all fees are deducted, the fund administrator can calculate the net asset value of the fund.

 

Creatrust, where innovation and reliability go hand-in-hand

Creatrust provides impartial and reliable advice that is founded on excellent communication and authoritative knowledge of all the key issues.

Our in-house specialists posses all the skills to help you add value to your operations, whether it is a matter of structure, correct taxation or an accountancy matter.

You can tell us about your requirements by filling in our online contact form and we will call you back to discuss your options. Alternatively, request a brochure or call our offices today on +352 277 299 99 so that we can help achieve added clarity and confidence.

 

Formula for Net Asset Value

As a mutual fund is a pool of investments divided into shares to be purchased by investors each share contains a weighted portion of individual investment in the collective pool.

The following net asset value formula is used to calculate a mutual fund's NAV per share.

 

 net asset value calculation
Net Asset Value Calculation

 

Some mutual funds have different categories of shares called share classes which are then considered as a separate portfolio within the mutual fund itself.

The fund administrator is then required to split the calculation of the NAV per each class of shares.

 

Performance fees are usually calculated to align the interest of the shareholders with  that of the manager; this is the reason some adjustments are taken into account when the fund administrator calculates those fees in case of losses incurred by the mutual fund during a period of time. A mechanism of equalisation may be put in place.

Another method is the  issuance of a new series of shares each time there is a subscription. Every month, the correct incentive fee accrual is calculated to each of the series separately. The fund administrator consolidates each of the series issued by the mutual fund into the lead series at the end of every accounting period.

 

Read also :

 

Fund Promoters

Latest news

See all news

Funds Department

Contact us

T +352 277 299 89

 

 

Creatrust is a member of the Ordre des Experts Comptables (Luxembourg) and an independent member of TGS Global Network Limited, an international network of professional business advisors.

© Creatrust  |  Legal  |  Conception 2exVia with MasterEdit©  | Disclaimer  |  Stay informed and subscribe to our newsletter  |  Recommend a friend  |  Intradomus | Sitemap