Fund Valuation

How does an asset manager value the investments it holds? 

Each individual fund can decide their own valuation policies, but they must all ensure transparency and full disclosure, and they can value all the assets of the fund when necessary. 

For public shares, it is easy to find the price as this is publicly available. 

For assets that have traded over the counter, such as bonds, a broker will have to confirm the price at a set time of day. This process of finding the value of a security is known as mark to market (MTM). 

For illiquid assets, such as real estate, an independent external expert must be employed to decide upon a fair value for them. 

It is much easier to find the price of liquid assets, such as publicly traded shares, government bonds, corporate bonds of major companies, foreign exchange rates, short term interest rates or commodities. Whereas less liquid assets include private equity, real estate or alternative investments. 

How do we calculate the fund NAV?

Once the correct value of the investments has been determined, you can find the value of individual fund shares, or the Net Asset Value. 

NAV = Net value of the fund / Number of shares.

For example, if the value of the fund is $99,097,574.93 and the fund has 4,515,928 shares, the net asset value is 99,098,574.93 / 4,515,928 = $21.94.