Net asset value
The net asset value (NAV) is the per share value of a mutual fund or exchange-traded fund (ETF). It is calculated as the total value of all securities in the fund less any liabilities, divided by the number of fund shares outstanding. The net asset value of an investment fund must be calculated using the fair value of the investment fund’s assets and liabilities.
Because ETFs and closed-end mutual funds are traded on stock exchanges, their quoted price can be above (trading at a premium) or below (trading at a discount) NAV. Open-end mutual funds are not traded on a stock exchange and therefore buy and sell orders are processed at the NAV of the trade date.
The definition of fair value is covered in Section 14.2 of the National Instrument 81-106 Investment Fund Continuous Disclosure and requires an investment fund to calculate its net asset value based on the fair value of the investment fund's assets and liabilities. While investment funds are required to comply with the definition of "fair value" in the Instrument when calculating net asset value, they may also look to the Handbook for guidance on the measurement of fair value. The fair value principles articulated in the Handbook can be applied by investment funds when valuing assets and liabilities.
Essentially determination of fair value rests on the following principles. The market value based on reported prices and quotations in an active market, or if the market value is not available, or the manager of the investment fund believes that it is unreliable, a value that is fair and reasonable in all the relevant circumstances.
It is the responsibility of the investment manager to establish and maintain appropriate written policies and procedures for determining the fair value of the investment fund’s assets and liabilities; and consistently follow those policies and procedures.
- OSC | Unofficial Consolidated National Instrument 81-106 and Companion Policy as of January 1, 2014, viewed February 22, 2014.
- OSC | Securities Law & Instruments - Instruments, Rules & Policies, viewed February 22, 2014.
- U.S. Securities and Exchange Commission, Net Asset Value